Here's what you need to know about the First-time Home Buyer Incentive

The government'sFirst-Time Home Buyer Incentive (FTHBI) comes into effect today.

The program is aimedat making it easier for young people to buy their first home by lowering newbuyers' monthly mortgage payments.

Introduced by theLiberals in their 2019 budget, the federal government will absorb five per centof monthly mortgage payments on existing homes and 10 per cent on new builds.

But there are a fewnotable conditions to watch out for, which have come under fire since theplan's March announcement. Ottawa-based mortgage broker Frank Napolitano spokewith CTVNews.ca to help lay it all out.

First off, to beconsidered eligible, applicants must not have owned a house in the last fouryears – exceptions will be made for those in a "breakdown of marriage orcommon-law partnership."

Secondly, ahomebuyers' combined annual household income must be lower than $120,000 beforetaxes and deductions. As Napolitano says, that qualifier strikes out mostresidents from Vancouver and the Greater Toronto Area.

"The max incomeis $120,000 that can be used for this program, therefore to qualify for amortgage – if you have no debt – it’s typically four, maybe four and a quartertimes your annual gross income so there’s not a lot of properties in the$500,000 range or less. Maximum property value under this program would be$560,000."

To that end, the FTHBIis more likely to benefit residents in less crowded markets, like smaller urbancentres in Ontario, Quebec, the Prairies, or out east where you can still finda home below the price cap.

Additionally, asNapolitano points out, first-time buyers will still have to cough up defaultinsurance under the plan.

"We've hadcustomers call us and say 'we'll put the 10 per cent down and then we’ll buy anew build and the government will give us 10 per cent so we don't have to paydefault insurance.' False. Regardless of the down payment, this program onlyworks if you have default insurance."

Default insuranceprotects financial institutions from default – the premium gets tacked on toyour mortgage payments.

There are obviouspaybacks for the government. While they provide an interest-free loan, theyalso secure shared equity in your home as it goes through gains and losses.This means the amount paid back to the government will fluctuate based on howmuch your home increases or decreases in value.

The loan must also bepaid back under three circumstances:

            •           ifyou sell your home;

            •           orat the end of 25 years.

Minister of Familiesand Social Development Jean-Yves Duclos – who also oversees the Canada Mortgageand Housing Corporation – is responsible for the rollout of the program. In anannouncement last Wednesday to informally launch the FTHBI, the minister toutedthe program for empowering the middle class.

"Thanks tomortgage payments that are more affordable, many families will have hundreds ofdollars more each month in their pockets – money to spend on things likehealthy food, sports activities for their kids, or even save for thefuture," said Duclos in the statement.

The program isexpected to serve about 100,000 Canadian homebuyers.