New policy aims to reduce monthly payments and encourage new home construction
Canada has pushed ahead with its budget proposal to extend amortization periods for insured mortgages by up to five years.
Starting August 1, first-time homebuyers purchasing newly constructed homes will be eligible for 30-year mortgage amortizations, up from the current 25 years. This change is expected to lower monthly mortgage payments, making it easier for young Canadians to enter the housing market.
Additionally, the policy is designed to incentivize the construction of new homes, addressing Canada's housing supply challenges.
“Canadians work hard to be able to afford a home,” the government wrote in its announcement. “However, the high cost of mortgage payments are a barrier on the path to homeownership, especially for Millennials and Gen Z.
“To break down these barriers and help more young Canadians buy a first home, Budget 2024 announced the federal government would allow up to 30-year amortizations for insured mortgages for first-time homebuyers purchasing new builds.”
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This initiative is part of the Canadian Mortgage Charter, which also includes provisions to protect homeowners facing mortgage difficulties and aims to improve generational fairness in the housing market. The Charter includes initiatives such as allowing renters to build credit scores through on-time rent payments.
The new policy builds upon existing programs like the Tax-Free First Home Savings Account, which has reportedly helped over 750,000 Canadians save for down payments more quickly.
“For every young Canadian who wants to own a home of their own, we want them to be able to qualify for a mortgage and afford their first home,” said Chrystia Freeland, deputy prime minister and minister of finance. “One of the biggest hurdles to homeownership for younger Canadians is qualifying for a mortgage and affording the monthly payments. That is why, starting August 1, first-time buyers of new builds will be able to reduce their monthly payments with up to 30-year mortgages. This is just one of the many new measures our government is taking to make the dream of homeownership a reality for younger Canadians.”
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