Canadians work hard to afford a home, yet the high cost of mortgage payments remains a significant barrier, especially for Millennials and Gen Z. To break down these barriers and help more young Canadians buy their first home, Budget 2024 announced that the federal government would allow up to 30-year amortizations for insured mortgages for first-time homebuyers purchasing new builds.
On July 29, 2024, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced that as of August 1, 2024, lenders will begin to offer these extended amortizations. This change will provide younger Canadians with more affordable monthly mortgage payment options, thereby making homeownership more accessible. Extending amortizations by up to five years will lower monthly payments, helping more young Canadians unlock the door to their first home while incentivizing the construction of more new homes.
The Strengthened Canadian Mortgage Charter: Ensuring Relief
The Canadian Mortgage Charter, as announced in Budget 2024, plays a crucial role in ensuring relief for homeowners inmortgage difficulty. It sets out clear expectations for financial institutions to provide tailored mortgage relief. Thisincludes options such as extending the amortization period, offering lower interest rates, or temporarily reducing payments to help homeowners manage financial hardships. These measures ensure that Canadians facing mortgage challenges can find solutions that fit their unique situations, preventing defaults and supporting stable homeownership.
Generational Fairness: Creating a Level Playing Field
Generational fairness refers to the equitable distribution of opportunities and resources across different age groups. In the context of housing, it ensures that younger generations, such as Millennials and Gen Z, have a fair chance at homeownership. Historically, these younger groups have faced higher hurdles due to rising housing costs and stricter mortgage qualification requirements. By allowing up to 30-year amortizations for insured mortgages on new builds, the federal government is taking significant steps to level the playing field. This initiative, combined with efforts to improve credit scores through on-time rent payments, aims to restore generational fairness in the housing market.
Tax-Free First Home Savings Account: A Key Tool for First-Time Homebuyers
Building on the success of the Tax-Free First Home Savings Account (FHSA), which has helped more than 750,000 Canadians start saving for a down payment faster, the federal government continues to support first-time homebuyers. The FHSA allows prospective first-time homebuyers to save up to $40,000 on a tax-free basis towards the purchase of their first home. Similar to a Registered Retirement Savings Plan (RRSP), contributions to an FHSA are tax-deductible, and withdrawals, including any investment income or growth earned in the account, are non-taxable, akin to a Tax-Free Savings Account (TFSA).
To open an FHSA, you must be a resident of Canada, at least 18 years old, and a first-time homebuyer. This means you and/or your spouse or common-law partner have not owned a home in which you lived as your principal place of residence at any time during the part of the calendar year before the account is opened or at any time in the preceding four calendar years. Contributions can be made in cash or in-kind, and the annual contribution limit is $8,000, with a lifetime maximum of $40,000. If unused, FHSA funds can be transferred tax-free to an RRSP or a Registered Retirement Income Fund (RRIF).
Government’s Commitment to Affordable Housing
The federal government’s ambitious plan to unlock nearly 4 million more homes aims to reduce construction costs, streamline building processes, and expand the construction workforce. This plan includes:
- A Public Lands for Homes Plan: Building affordable housing on public lands across the country.
- $15 billion in additional loans for the Apartment Construction Loan Program: Constructing a minimum of 30,000 new rental apartments.
- Launching Canada Builds: Creating affordable homes for the middle class on under-utilized lands, combining federal low-cost loans with provincial and territorial investments.
- Supporting Indigenous Peoples: Providing additional investments for housing in urban, rural, and northern areas.
Quote from the Honourable Chrystia Freeland
“For every young Canadian who wants to own a home of their own, we want them to be able to qualify for a mortgage and afford their first home. One of the biggest hurdles to homeownership for younger Canadians is qualifying for a mortgage and affording the monthly payments. That is why, starting August 1, first-time buyers of new builds will be able to reduce their monthly payments with up to 30-year mortgages. This is just one of the many new measures our government is taking to make the dream of homeownership a reality for younger Canadians.”
By implementing these measures, the federal government is taking significant steps to ensure that every generation has the opportunity to reach their full potential, including the dream of owning a home.
