An online mortgage brokerage has developed a calculator to help consumers assess the potential costs and benefits of the first-time homebuyer incentive (FTHBI).

The calculator aims to assess whether lower mortgage payments in the short-term are worth the payback in equity if a home’s value appreciates.

“We help somebody assess not just how much interest would you save, but how much property would you give up for those interest savings,” said Alex Leduc, founder and CEO of Mortgauge.

FTHBI offers interest-free loans on up to 5% of the purchase price of a resale home or up to 10% of a new-construction property. It applies to buyers with a maximum household income of $120,000 and a minimum down payment for an insured mortgage on a home valued at no more than $560,000. Last month, Liberals pledged to expand the incentive by raising the maximum allowable purchase to $789,000 and the household income qualification to $150,000.

While it would allow more homes to qualify, buyers would still be paying back a portion of their equity, Leduc said.

“Right now, I can fund someone at 2.4% on a five-year fixed [loan]. But let’s say [interest] rates jump so it’s now 3.5% ... now it starts to get more interesting because the higher the interest rate, the more I save from doing this,” Leduc said.

Also, buyers still need the minimum down payment to qualify for the 5% or 10%.

“If first-time homebuyers didn’t need the minimum to get in, that might be interesting. Or, if they could use that 5 or 10% to get to 20% and not pay mortgage insurance, that would be interesting,” Leduc told The Star. “If a buyer could use the incentive loan to get their down payment above 20% so they didn’t need mortgage insurance that could be beneficial.”

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