Happy Friday! Some important news from the Canadian Government that has some people praising the move, and some scratching their heads.
On Thursday, the finance minister announced a few changes to help make housing more attainable for first-time home buyers.
As of August 1, 2024, the government will allow 30-year amortization periods on insured mortgages for first-time home buyers purchasing newly built homes. Currently, the maximum amortization allowed on a purchase of a home with less than 20% down is 25 years (for both pre-existing homes and new builds).
While this will help some buyers, it’s a very niche group. In Vancouver, it’s difficult to find a new build that’s under $1 million (and anything over $1 million cannot be insured). It may be very helpful in other provinces, however, in many areas of BC, maybe not so much.
A couple questions I have:
Why only newly built homes? Likely to spur more construction?
Why only first time-home buyers? Right now, a lot of mortgage holders would feel some relief with a longer amortization period.
With this change, there’s so much more that needs to be done. This doesn’t actually help with affordability; it more so makes debt easier to obtain.
The next two changes announced relate to first-time home buyers using the Home Buyers' Plan:
As of April 16, 2024, the government is raising the $35,000 tax-free, withdrawal limit to $60,000.
Canadians who withdraw from their registered retirement savings plans (RRSPs) between January 1, 2022, and December 31, 2025, will see their repayment grace period of two years extended to five years.
These two changes will be very helpful to all first-time home buyers who have been contributing to their RRSPs.
While it’s not perfect, and we’ve got a ways to go, it’s really good to see some changes happening that will give some first-time home buyers a step up.
As always, reach out with any questions. Always happy to chat!
Nadia
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