If you’re a first-time homebuyer in Canada, there’s some big news that could affect your journey into the housing market. Starting Jaanuary, new government policies will extend the amortization period for insured mortgages from 25 years to 30 years. Additionally, the cap on insured mortgages will increase from $1 million to $1.5 million. These changes aim to make homeownership more accessible, particularly for new builds and first-time buyers.

What does this mean for you?

The extended 30-year amortization period offers more time to pay off your mortgage, resulting in reduced monthly payments. This can provide some much-needed breathing room in your monthly budget, allowing you to manage other rising expenses such as groceries and utility bills.

However, there are trade-offs to consider. Lower payments may lead to higher demand for homes, which could potentially drive-up prices. Additionally, stretching payments over a longer period increases the total interest paid on your mortgage, potentially adding up to 20 per cent more over 30 years compared to a 25-year term.

By raising the insured mortgage cap to $1.5 million, more homes in high-demand cities such as Toronto, Vancouver and Calgary may now be within reach. This adjustment significantly lowers the down payment needed to qualify for a home at the new cap. For instance, instead of requiring $300,000 for a $1.5 million home, the down payment could now be as low as $125,000 – an appealing change for many first-time buyers.

WHY THESE CHANGES MATTER

Improved affordability
The combination of lower monthly payments and access to a broader range of properties enhances the sense of affordability for first-time buyers. Keep in mind, though, that rising demand could lead to price increases, which might counteract some of the affordability benefits.

Expanded housing options
With greater financial flexibility, you’ll be able to explore a wider variety of homes without making as many compromises. This could make it easier to find a property that fits your lifestyle and long-term needs.

Better budget management
Lower monthly payments can help new homeowners balance their budgets during a critical transition. However, be prepared for potential market fluctuations that could affect home prices and your overall financial plan.

Incentives for new builds
The 30-year amortization specifically for new builds is a noteworthy addition, encouraging investment in newly constructed homes. While this change provides a helpful boost, increasing housing supply remains essential for long-term affordability. Policymakers will need to focus on removing barriers to new construction to make meaningful progress.

What’s next for you?
If you’re planning to buy your first home, now is the perfect time to evaluate your budget. Use these new policies to your advantage by getting pre-approved through a mortgage broker such as ours at Homewise to understand how much you can borrow. Working with an experienced real estate professional can also help you navigate the market and identify properties that fit your criteria.

These new measures aim to make the Canadian housing market more accessible for first-time buyers. While there are considerations to weigh, they offer an opportunity to take a significant step toward owning your dream home. If you’d like personalized guidance or have any questions, reach out to us today.