The federal government has proposed some new housing affordability measures geared toward making the Canadian housing market more affordable for first-time buyers. Among the new measures, first-time buyers will have the option to take out a 30-year amortization on their mortgage, and the first-time Home Buyer’s Plan RRSP withdrawal amount is being increased to $60,000, from $35,000.
The 30-year amortization term, which would come into effect on August 1, 2024, comes with some caveats. Namely, the mortgage must be insured (priced below $1 million with a down payment of less than 20 per cent) and it must be a newly built home.
The new 30-year amortization period, up from the conventional 25-year term, would allow first-time buyers greater flexibility and lower monthly mortgage payments. The policy also aims to encourage homebuilders to increase their production of supply.
Faced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them. We are changing that. What we are announcing today will make a downpayment much more attainable for younger Canadians. And by extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.
According to the Government of Canada, the enhancements to mortgage amortization will also include “an expectation that, where appropriate, permanent amortization relief will be made available to protect existing homeowners that meet specific eligibility criteria. Amortization relief means eligible homeowners can reduce their monthly mortgage payment to a number they can afford, for as long as they need to.”
There is a possibility that extended mortgage amortization periods could result in an increase in first-time buyer activity on new builds, and as a result, higher prices.
Changes to the first-time Home Buyer’s Plan also include a proposal that Canadians who withdraw funds from their RRSP for the purchase of a first home, between January 1, 2022 and December 31, 2025, will have their repayment grace period extended by three years, meaning they will now have up to five years before they must start repaying the money to their RRSP.
