Canada to Extend 30-Year Amortization for First-Time Buyers Purchasing New Homes

The federal government will allow 30-year amortization periods on insured mortgages for first-time homebuyers purchasing newly built homes.

Finance Minister Chrystia Freeland made the announcement in Toronto on April 11, saying it will take effect Aug. 1.

“Faced with a shortage of housing options and increasingly high rent and home prices, younger Canadians understandably feel like the deck is stacked against them,” Ms. Freeland said in a news release.

“By extending amortization, monthly mortgage payments will be more affordable for young Canadians who want that first home of their own.”

Under the current rules, if a down payment is less than 20 per cent of the home price, the longest allowable amortization—the length of time a homeowner has to repay their mortgage—is 25 years.

The Canadian Home Builders’ Association has advocated for longer amortization periods, saying five more years would help with affordability and spur more construction.

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Ms. Freeland also said the government will raise the amount first-time homebuyers can withdraw from their RRSPs—to $60,000 from $35,000—to buy a home. That will take effect April 16, the day the federal budget is set to be released.

The government said the change reflects the reality that the size of a down payment and the amount of time needed to save up for one are much larger than they used to be.

People who have made or will make withdrawals between Jan. 1, 2022 and Dec. 31, 2025 are also getting more time to begin repayment—up to five years in total rather than two.

Ottawa said those changes are meant to work in tandem with the First Home Savings Account, which it launched last year. The rules governing that program allow prospective homebuyers to start saving for up to 15 years once they open an account, with an annual $8,000 deposit cap and a lifetime contribution limit of $40,000.

Ms. Freeland said more than 750,000 Canadians have opened an FHSA to date. While the program came online April 1 of last year, most Canadian financial institutions only began offering the account as of last summer or fall.

Ottawa also announced changes to the Canadian Mortgage Charter that will include an expectation that financial institutions offer permanent amortization relief to protect existing homeowners who meet certain eligibility criteria.

That would allow eligible homeowners to reduce their monthly mortgage payment to a number they can afford for as long as needed.