Another day, another dollar deeper in debt.That sums up the Liberals’ new plan for first-time home buyers who will be able to amortize mortgages over a longer term and increase the amount they can pull from RRSPs for deposits.As of April 16 — when the budget is tabled — first-time buyers will be able to pull $60,000 from their RRSPs for down payments, up from $35,000 at present and apply it to a 30-year mortgage, up from 25 years at present..“Faced with a shortage of housing options and increasingly high rents and home prices, many younger Canadians feel that the dream of homeownership is just that, a dream,”Finance Minister Chrystia Freeland.Speaking in Toronto, Finance Minister Chrystia Freeland said Canadians will also now have five years before they have to start paying back the RRSP top-up, up from two years at present. The changes apply to anyone who makes or has made a withdrawal from the Home Buyers’ Plan between 2022 and 2025. It’s all part of a series of pre-budget announcements the Liberals say is aimed at making it easier for people, especially younger ones, to buy homes.“Faced with a shortage of housing options and increasingly high rents and home prices, many younger Canadians feel that the dream of homeownership is just that, a dream,” Freeland said.“Our government is changing that. We want home ownership to be a reality for younger Canadians.”.“While it’s currently possible to get an insured mortgage with a new build, it’s rare. For hot markets such as Vancouver and the GTA, most new condo and freehold builds are priced over one million, which means buyers have to take uninsured mortgages,”Victor Tran, Rates.ca.The kicker is that the changes apply only to new-build construction of detached, multi-family homes, condominiums and apartments.The longer amortizations also only apply to insured mortgages under $1 million where less than 20% of the principle is paid up from as a downpayment.Experts said stretching out amortizations to 30 years from the traditional 25 years could potentially reduce the monthly payments, though the overall amount of interest paid over the term of a mortgage would inevitably rise.Also, experts said the $1 million threshold makes it unlikely that the program will help buyers in the country’s largest — and priciest — real estate markets in cities such as Vancouver or the Greater Toronto Area.In early March, the government announced it was discontinuing the First Time Home Buyer Incentive, a shared-equity program that aimed to ease the burden of saving up for a downpayment. But it saw little uptake in the country’s priciest markets precisely for the same reason.“While it’s currently possible to get an insured mortgage with a new build, it’s rare. For hot markets such as Vancouver and the GTA, most new condo and freehold builds are priced over one million, which means buyers have to take uninsured mortgages,” said Victor Tran, a mortgage and real estate expert at Rates.ca..More than 750,000 Fist Time Home Savings accounts have been opened since they were introduced last year, although the government cancelled the First Time Home Buyers Incentive in March.The federal government also said it would amend the Canadian Mortgage Charter, first introduced in November’s Fall Economic Statement, to offer “permanent” amortization relief to struggling homeowners.“Where appropriate,” eligible homeowners would be able to apply to their lender for an extended amortization for as long as they need it according to a Finance Canada statement, which did not specify the criteria homeowners would need to qualify.But Ratehub co-CEO James Laird said those changes are mostly window dressing. “The proposed changes to the Canadian Mortgage Charter are mostly political talking points and will have little real world impact.”Freeland also indicated on Thursday that more than 750,000 first home savings accounts (FHSA) have been opened across Canada roughly a year after the savings plans were introduced. Like the RRSP Home Buyers’ Plan, the FHSA allows first-time buyers to set aside up to $40,000 tax-free dollars towards a down payment, but the amount does not need to be paid back.
