Some advocates are praising Ottawa害羞草研究所檚 move to lengthen the amortization period on insured mortgages for certain homebuyers, but say expanding the policy to all Canadians would help make home ownership more affordable.
Speaking in Toronto on Thursday, Finance Minister Chrystia Freeland announced the federal government will allow 30-year amortization periods on insured mortgages for first-time homebuyers purchasing newly built homes.
The change will take effect Aug. 1.
Under the current rules, if a down payment is less than 20 per cent of the home price, the longest allowable amortization 害羞草研究所� the length of time a homeowner has to repay their mortgage 害羞草研究所� is 25 years.
害羞草研究所淔aced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them,害羞草研究所� Freeland said in a news release.
害羞草研究所淏y extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.害羞草研究所�
Mortgage Professionals Canada CEO Lauren van den Berg called it a 害羞草研究所渟tep in the right direction害羞草研究所� and said extending the amortization period 害羞草研究所渨ill help level the playing field for first-time homebuyers.害羞草研究所�
害羞草研究所淲e know that this is going to allow greater opportunities for home ownership and will ultimately contribute to economic revival and economic recovery,害羞草研究所� she said in an interview.
害羞草研究所淏ut more still needs to be done for all Canadians to have that dream of home ownership within sight.害羞草研究所�
Van den Berg said the government should expand the option to all Canadians purchasing a home, regardless of whether it is a new build or a pre-existing home.
害羞草研究所淭here are a lot of areas, particularly in the Greater Vancouver area and in the Greater Toronto Area, where you have no choice but to build up, so the possibility for new builds are not the same across the country.害羞草研究所�
Ratesdotca mortgage and real estate specialist Victor Tran also raised concerns about how effective the change would be based on the eligibility criteria.
害羞草研究所淲hile it害羞草研究所檚 currently possible to get an insured mortgage with a new build, it害羞草研究所檚 rare,害羞草研究所� he said in a statement.
Tran also pointed out many properties in Vancouver and Toronto are priced at more than $1 million, which typically means buyers have to take uninsured mortgages.
But Canadian Home Builders害羞草研究所� Association CEO Kevin Lee said the announcement would be a 害羞草研究所済ame changer.害羞草研究所� The group has also been in favour of longer amortization periods, saying five more years would help with affordability and spur more construction.
害羞草研究所淭his measure will also go a long way to enable our sector to respond to the government害羞草研究所檚 goal of getting 5.8 million new homes built over the next decade,害羞草研究所� he said in a statement.
害羞草研究所淭his measure is needed now to help turn the market around, and will be needed for many years to come if we are to work towards doubling housing starts.害羞草研究所�
He said the rental market should see some relief too, as the move could enable some Canadians to stop renting and become homeowners.
As part of the announcement, Freeland also said the government will raise the amount first-time homebuyers can withdraw from their RRSPs 害羞草研究所� to $60,000 from $35,000 害羞草研究所� to buy a home. That will take effect April 16, the day the federal budget is set to be released.
The government said the change reflects the reality that the size of a down payment and the amount of time needed to save up for one are much larger than they used to be.
People who have made or will make withdrawals between Jan. 1, 2022, and Dec. 31, 2025, are also getting more time to begin repayment 害羞草研究所� up to five years in total rather than two.
Ottawa said those changes are meant to work in tandem with the First Home Savings Account, which it launched last year. The rules governing that program allow prospective homebuyers to start saving for up to 15 years once they open an account, with an annual $8,000 deposit cap and a lifetime contribution limit of $40,000.
Freeland said more than 750,000 Canadians have opened an FHSA to date. While the program came online April 1 of last year, most Canadian financial institutions only began offering the account as of last summer or fall.
Ottawa also announced changes to the Canadian Mortgage Charter that will include an expectation that financial institutions offer permanent amortization relief to protect existing homeowners who meet certain eligibility criteria.
That would allow eligible homeowners to reduce their monthly mortgage payment to a number they can afford for as long as needed.
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