Canadian Government Extends Mortgage Amortization Periods to 30 Years To Aid First-Time Homebuyers

The Canadian government is set to extend amortization periods for insured mortgages, catering particularly to first-time homebuyers eyeing newly built residences. Finance Minister Chrystia Freeland unveiled this development in Toronto, revealing that the change would be implemented starting August 1.

“In light of the limited housing options and soaring rental and property costs, younger Canadians understandably perceive an uneven playing field,” Freeland expressed in a press statement.

With this extension, monthly mortgage payments will become more within reach for aspiring young homeowners seeking their inaugural abode.

Presently, if a down payment falls below 20 percent of the home’s value, the maximum allowable amortization—referring to the duration for mortgage repayment—stands at 25 years.

The Canadian Home Builders’ Association has been a vocal proponent for elongating amortization periods, asserting that an additional five years would enhance affordability and stimulate construction endeavors.

Freeland additionally declared a hike in the amount first-time homebuyers can withdraw from their Registered Retirement Savings Plans (RRSPs) to $60,000 from the previous $35,000. This amendment is slated to take effect on April 16, coinciding with the release of the federal budget.

The adjustment is said to mirror the current landscape where down payment sizes and the time required to amass them have substantially increased.

Furthermore, individuals who have made or will make withdrawals between January 1, 2022, and December 31, 2025, will be granted an extended repayment window—up to five years in total, as opposed to the prior two years.

Ottawa emphasized that these modifications are designed to complement the First Home Savings Account (FHSA) initiative launched last year. Under the FHSA guidelines, prospective homebuyers can commence a 15-year savings journey upon opening an account, with an annual deposit ceiling of $8,000 and a cumulative contribution cap of $40,000.

Freeland disclosed that over 750,000 Canadians have initiated an FHSA to date, though most financial institutions began offering the account only recently, during the summer or fall following its introduction on April 1 last year.

Ajay Kumar