Major Update on Mortgage Policies for First-Time Homebuyers

, , , - Mario Conte - April 19, 2024

Canada to allow 30-year amortization for first-time buyers' mortgages on new homes. The federal government has announced a pivotal update set to take effect on August 1st, permitting 30-year amortization periods on insured mortgages exclusively for first-time homebuyers purchasing newly built homes. This adjustment aims to make homeownership more accessible amidst escalating rent and home prices, which have disproportionately affected younger Canadians.

Deputy Prime Minister Chrystia Freeland highlighted in a recent press release, "Young Canadians are facing a daunting housing market. Extending amortization periods will make monthly mortgage payments more manageable, helping them secure their first home."

Lauren van den Berg, CEO of Mortgage Professionals Canada, supports the initiative, describing it as a "step in the right direction." She emphasizes that elongating the amortization period will "level the playing field for first-time homebuyers," fostering broader opportunities for home ownership and contributing to the economy's revival.

However, Van den Berg also voiced that further measures are necessary to ensure that the dream of homeownership is reachable for all Canadians, advocating for the extension of this option beyond just new builds to include pre-existing homes.

Concerns about the change's effectiveness were noted by Victor Tran, a mortgage and real estate specialist at Ratesdotca, due to restrictive eligibility criteria. Tran pointed out that in high-priced areas like Vancouver and Toronto, many properties exceed $1 million, often necessitating uninsured mortgages.

Conversely, Kevin Lee, CEO of the Canadian Home Builders' Association, called the announcement a "game changer," which he believes will significantly aid in achieving the government's ambitious target of 5.8 million new homes within the next decade. Lee anticipates this policy will also alleviate some pressure on the rental market by enabling more Canadians to transition from renting to owning.

Further supporting first-time homebuyers, the government will increase the allowable RRSP withdrawal limit from $35,000 to $60,000, effective April 16th. This change is part of a broader strategy to assist Canadians in navigating the increasingly challenging process of saving for a down payment.

In addition to these mortgage amendments, the government plans to adjust the Canadian Mortgage Charter to encourage financial institutions to offer permanent amortization relief for qualifying existing homeowners, ensuring their monthly payments remain affordable.

These initiatives are complemented by the First Home Savings Account, introduced last year, which allows prospective homeowners up to 15 years to save for a home with significant tax advantages.

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