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Canada to allow 30-year amortization for first-time buyers' mortgages on new homes



The Canadian government has greenlit a significant change in mortgage policy, set to provide relief and support for first-time homebuyers across the country. Starting August 1, those purchasing newly constructed homes will have the option of extending their mortgage amortization periods to 30 years.


Finance Minister Chrystia Freeland unveiled this pivotal decision during an address in Toronto. This move aims to alleviate the financial burden on aspiring homeowners and stimulate the housing market. 


The announcement comes after advocacy from the Canadian Home Builders' Association, which has long championed the extension of amortization periods. They argue that extending these periods by five years would enhance affordability and act as a catalyst for increased construction activity.


In addition to the extension of mortgage terms, Freeland announced a substantial increase in the withdrawal limit from Registered Retirement Savings Plans (RRSPs) for first-time homebuyers. Currently set at $35,000, this limit will surge to $60,000 effective April 16, coinciding with the release of the federal budget.


This adjustment in withdrawal limits is poised to empower first-time buyers with greater financial flexibility, potentially opening doors to homeownership that were previously out of reach. By leveraging funds from their RRSPs, individuals can now access a more substantial sum towards their home purchase, facilitating a smoother transition into homeownership.


Furthermore, there's good news for those who have already made withdrawals or are planning to do so. Those who made withdrawals between January 1, 2022, and December 31, 2025, will benefit from an extended repayment timeline. Instead of the previous two-year repayment window, they now have up to five years to commence repayment.


This extension offers relief to individuals who may have faced challenges in meeting their repayment obligations within the original timeframe. It acknowledges the financial realities that homebuyers may encounter, providing them with a more manageable pathway to fulfilling their repayment commitments.


The combined impact of these measures is anticipated to inject vitality into the housing market, particularly in the realm of newly constructed homes. By extending mortgage terms and enhancing financial assistance options, the government aims to foster a more inclusive and accessible housing landscape for Canadians, particularly those entering the housing market for the first time.


Overall, these policy adjustments signal a proactive approach from the Canadian government to address the evolving needs of homebuyers and bolster the resilience of the housing sector in the face of economic challenges.


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