Canada to Allow 30-Year Mortgages on New Homes for Some Buyers‍

Canada to Allow 30-Year Mortgages on New Homes for Some Buyers‍
DATE
April 11, 2024
READING TIME
time

The Canadian government announced changes to mortgage regulations on April 11, 2024, aimed at improving affordability for first-time homebuyers looking to purchase newly built homes. This move comes amidst ongoing concerns about housing affordability in Canada, particularly for younger generations.

Key Changes

  • Extended Amortization Period:  Starting August 1, 2024, qualified first-time homebuyers purchasing newly constructed homes will be eligible for mortgages amortized over 30 years. Previously, the maximum amortization period for such mortgages was 25 years. This extension allows for potentially lower monthly payments, potentially making homeownership more attainable for some buyers.
  • Increased RRSP Withdrawal Limit: The budget proposes nearly doubling the withdrawal limit under the Home Buyers' Plan (HBP) from $35,000 to $60,000. The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plans (RRSPs) for a down payment. This increase could significantly ease the burden of saving for a down payment.

Potential Impact

  • Affordability Boost: The extended amortization period could make homeownership more accessible for some first-time buyers, particularly in a climate of rising interest rates. Lower monthly payments could free up disposable income, potentially allowing buyers to qualify for a larger mortgage.
  • Stimulus for New Housing Market:  By specifically targeting new construction, the policy could stimulate the new home market. This could benefit builders and contribute to increased housing supply, potentially easing overall affordability pressures.
  • Limited Impact on Existing Housing:  The policy change is restricted to first-time homebuyers purchasing newly built homes. Existing home prices are unlikely to be significantly affected.
  • Potential Price Increases for New Homes:  Some experts, like mortgage professional Ron Butler on Twitter, caution that the extended amortization could lead to a slight increase in new home prices, particularly in specific regions. This is because buyers may qualify for larger mortgages, potentially driving up competition.

Important Considerations

  • This policy only applies to those purchasing new builds with less than a 20% down payment and qualifying for mortgage default insurance.
  • It's crucial to consult a qualified mortgage professional to understand individual eligibility and determine the most suitable mortgage options.
  • Coldwell Banker Horizon Realty is here to guide you through the home buying process. Contact us today to explore your options!

The Long-Term Outlook

The true impact of these changes will likely take time to emerge. While the government hopes it will improve affordability for first-time buyers, some experts remain cautious about potential inflationary pressures on new home prices. Prospective buyers should stay informed and conduct thorough research before making any decisions.

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