The Department of Finance Canada announced on July 29, 2024 that as of August 1, 2024 the Federal Government would allow up to 30-year amortizations for insured mortgages for first-time homebuyers who purchase new build homes. The goal of the initiative is to break barriers and help put homeownership within reach for Gen Z and Millennials. Homeownership, or lack thereof, for Gen Z and Millennials has been an ever-increasing topic amongst legislators, media outlets, and housing analysts. In an article posted by Global News titled, ‘Never been harder time’: here’s the income you need to buy a home in Canada, the article from 2023 sets out that homebuyers will need an annual income of $127,350.00 to purchase a house in Ottawa (based upon the average home price March 2023 of $622,300.00).
As a step to break barriers and help put homeownership within reach for Gen Z and Millennials, the Federal Government hopes that introducing a 30-year mortgage amortization will help “restore generational fairness”. With a 30-year mortgage amortization, the desire is that it will offer younger Canadians more affordable monthly mortgage payment options while also incentivizing construction of more new homes.
How can I qualify?
As part of the qualifications of the 30-year mortgage amortization, a purchaser must:
(a) be a first-time home buyer,
(b) purchase a new build home, and
(c) purchase mortgage default insurance.
Currently, if you make a down payment of less than 20% on the purchase price of a home, mortgage default insurance must be obtained purchased. If you purchase a home with a purchase price of $1 million or above, then mortgage default insurance is not available. This, therefore, caps the purchase price for the Federal incentive at $999,999.
Critics of the new incentive say that the 30-year mortgage amortization will result in homes taking longer to build equity. As well, with the incentive, the Canada Mortgage and Housing Corporation (known as “CMHC”) will apply a surcharge of 0.20% to mortgage default insurance premiums which critics say will cut into monthly savings of homeowners.
Other Mortgage Incentives
The 30-year mortgage is one part of the Federal Budget 2024 that enhances the Canadian Mortgage Charter providing support to Canadians who face mortgage hardship. Also included in the Budget 2024 is to use rent payment history, improving a person’s credit score, as part of mortgage applications to help more renters become homeowners.
This blog post was written by Daniella Sicoli-Zupo, a Partner in the Real Estate team, and Tiffany Mayhew, Summer Law Student. Daniella can be reached at 613-369-0378 or at daniella.sicoli-zupo@mannlawyers.com.
