30-Year Amortizations for All First-Time Homebuyers & ALL Buyers for New Builds

The Liberal government has unveiled significant changes to Canada’s mortgage market, aimed at making homeownership more accessible, especially for first-time buyers and all pre-construction buyers. On Monday, Deputy Prime Minister and Finance Minister Chrystia Freeland announced two major proposals: extending mortgage amortizations to 30 years and increasing the price cap for insured mortgages.

Amortization Changes

Starting December 15, first-time homebuyers and those purchasing new builds will have access to insured mortgages with a 30-year amortization, up from the traditional 25-year limit. This extended amortization period reduces the monthly financial burden, making mortgage payments more manageable. However, it also means that homeowners will pay roughly 26% more in interest over the life of the loan.

Price Cap Changes

Additionally, the cap for insured mortgages will rise to $1.5 million, compared to the previous limit of $1 million. This change is designed to address affordability in Canada’s most expensive housing markets such as the GTA & Vancouver, where the average home price exceeds $1 million. With this new cap, prospective buyers can put down as little as 5-20% on a home worth up to $1.5 million, significantly lowering the required down payment.

Purpose

Freeland positioned these changes as part of the government’s ongoing effort to help Canadians achieve homeownership. The proposals follow earlier reforms from August 1, which allowed 30-year amortizations for first-time homebuyers purchasing new builds. It has now been expande to include all first-time homebuyers and all buyers purchasing pre-construction properties. This effectively increases the buying power in the new-build market by 10 to 15%, an effort likely to boost new home construction sales which have declined by over 60% year-over-year.

What Does This Mean for Investors?

These development changes to CMHC policies are significant, especially if "all buyers" is to include investors. While the official press release does not explicitly mention investors, it emphasizes that the policy applies to "all buyers." Furthermore, Finance Minister Chrystia Freeland described it as a supply-side measure, suggesting a strategic move to direct investor capital towards pre-construction projects - where housing is being created - rather than the resale market, which often fuels criticism against investors for limiting housing availability for regular homebuyers.

This shift could be seen as addressing a key barrier to investment in new builds, namely the challenge of cash flow. With extended amortizations, monthly payments would potentially decrease by approximately 8%, improving the financial viability of new construction investments. Therefore, if these changes apply to investors, it could represent a substantial impact on the housing market.

Takeaway 

Regardless, in high-cost markets, where property prices often exceed the $1 million threshold, these measures could provide crucial relief to Canadians struggling to save for a home. By extending amortizations and raising the cap on insured mortgages, the government is hoping to make homeownership a reality for more people across the country. These changes can also allow investors to potentially reconsider pre-construction homes as a safe and positive-cashflow investment once again to boost the new home construction industry and its sales.

Sources: 

Ottawa to expand 30-year amortizations, raise insured mortgage cap - National | Globalnews.ca

Government announces boldest mortgage reforms in decades to unlock homeownership for more Canadians