The government allows longer amortization for some first-time home buyers!

The federal government has announced that first-time homebuyers purchasing newly constructed homes and condos will be allowed a 30-year amortization period on insured mortgages (price up to $1 million and less than 20% down payment).

Finance Minister Chrystia Freeland said in Toronto on Thursday that the initiative will come into effect on August 1, and also announced that the government will increase the amount that first-time homebuyers can take from an RRSP to buy a home from $35,000 to $60,000 . The change will come into effect on April 16, when the government unveils a budget that is expected to focus on housing measures.

As housing becomes increasingly unaffordable for many young Canadians and first-time homebuyers, the introduction of longer amortization periods has recently been frequently floated as a possible solution by many experts in the mortgage market.

In early March, the government announced it would end the First-Time Home Buyer Incentive, a home equity program that was aimed at easing the burden of saving for a down payment but found little traction in the country’s most expensive markets.

Freeland also said the government would change mortgage rules to allow people struggling to pay off their monthly house debts to extend repayment terms to 35 years.

Robert Asselin, a former Liberal economic adviser and senior vice-president of policy at the Business Council of Canada, warned the measures could boost demand for new homes at a time when record building levels are no longer keeping up and governments at all levels are trying to increase supply. .

“In my opinion, it’s a little contradictory,” Asselin said.

Let us remind you that currently the maximum amortization on insured mortgages is 25 years. The introduced increase to 30 years will allow the average family in Toronto, purchasing their first home and from a developer, to qualify for 30-40 thousand more when receiving a mortgage and, accordingly, afford slightly more expensive real estate.

We will definitely wait for more detailed official comments and program details. But based on provided information, 30 years amortization would only apply to the new constructed insured purchases with the maximum price of 1 mil (maximum insured purchase price under current guidelines), thus will have very little effect on the GTA housing market and only new build condos and small townhouses outside of Toronto might fall under this program.