Unlocking Housing Access: Federal Initiatives Empower First-Time Home Buyers

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The federal government unveiled new measures aimed at improving access to housing for first-time home buyers before the 2024 federal budget, as the government acknowledged the challenges young homebuyers face in saving a down payment for their purchase.
Unlocking Housing Access: Federal Initiatives Empower First-Time Home Buyers

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The federal government unveiled new measures aimed at improving access to housing for first-time home buyers before the 2024 federal budget, as the government acknowledged the challenges young homebuyers face in saving a down payment for their purchase.

“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.”

Minister of Finance and Deputy Prime Minister Chrystia Freeland said in a release.

The new measures consist of:

Extending the maximum amortization period for an insured mortgage on new builds:

Starting August 1, 2024, first-time home buyers purchasing new construction and whose down payment is less than 20% and thus an insured mortgage, will have the option to extend their mortgage amortization to 30 years from the previous maximum of 25 years. Meanwhile, those making a down payment exceeding 20% can negotiate with their lender for a mortgage repayment period ranging from 30 to 35 years.

Takeaways

  • Longer amortization will help first-time home buyers qualify for a mortgage.
  • Allows first-time home buyers to lower their mortgage payments.
  • Longer amortization means more interest paid, assuming no pre-payments are made.

Read More: First-Time Home Buyers Tools and Resources

Increase in Home Buyers’ Plan limit:

Starting April 16, 2024, the Home Buyers’ Plan limit will be raised from $35,000 to $60,000. This program enables first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) tax-free. First-time homebuyers who withdraw from their Home Buyers’ Plan between January 1, 2022, and December 31, 2025, will have an extended repayment period of up to five years, an increase from the current grace period of two years.

Permanent amortization relief for existing homeowners:

Changes to the Canadian Mortgage Charter to offer relief in mortgage amortization for eligible existing homeowners. Freeland cited an example of an insured borrower with an original 25-year amortization receiving an extension to 35 years to reduce their payment size.

The extension of the maximum amortization period for insured mortgages on new builds marks a partial reversal of the policy enacted in 2012, when the maximum amortization period for insured mortgages was reduced from 30 years to 25 years due to concerns about escalating household debt levels and the potential risks linked to longer mortgage terms.

However, by permitting longer amortization for certain mortgages, borrowers can enjoy advantages such as reduced monthly payments and enhanced cash flow, especially amidst the current high-interest rate environment.

Prospective homebuyers keen on understanding the implications of these measures are encouraged to consult a mortgage broker. These professionals can offer personalized guidance tailored to their individual financial circumstances and housing objectives.

See the full news release from the Department of Finance.

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