on April 16, 2024 
1. The 30 year amortization is back
The 2024 Federal Budget announced last week is bringing back 30 year amortizations for first time buyers using high ratio mortgages to buy a newly built home or condo, effective August 1, 2024
Given the specificity of the program – only first time buyers, only high ratio mortgages and only for newly built homes – this won’t be something that has broad-based impact on the market.
But for younger buyers who are trying to get into the property market, this could help with buying a starter home, condo, townhouse or half-duplex.
How does it work?
One aspect of mortgage qualification is the ratio of your monthly gross income compared to your monthly debt payments. Since a 30 year amortization mortgage has lower monthly payments than a 25 year amortization (the current limit), this change will allow first time buyers to borrow a larger mortgage amount to buy a new home.
For example, a couple earning a combined household income of $100,000 under a 25 year amortization can qualify for a maximum mortgage of about $405,000 (at today’s rates and depending on the exact property taxes, heating cost and strata fees of the property). By increasing to a 30 year amortization, the same couple on the same property will qualify for a mortgage of $432,000.
It’s not a massive change, but for those house hunters who are finding things just a bit out of reach, this could make a real difference and allow them to get into their first house.
Who really benefits?
While this change is being advertised as a gift for first time buyers, the fact that the government has tied it to newly built homes makes this program just as much, if not more, a gift to the construction industry. The government is clearly trying to push for more housing construction overall, and at price-points that are under $1 million (the maximum allowed for high-ratio mortgages). So the real idea here is to expand the buyers for new construction developments (encouraging builders) while not causing further inflation to the prices of existing homes.
This program will also dove-tail neatly with the Federal Government’s push for municipalities to densify and build more apartment and townhomes developments and allow multiplexes on standard city lots.
2. Allowed RRSP withdrawal increase to $60,000
As of today, April 16th, the RRSP Home Buyer’s Plan will soon allow first time buyers to withdraw up to $60,000 from an existing RRSP account in order to use the money for a down payment on a home purchase. It will also allow a 5 year grace period before the participants have to begin paying money back into their RRSP.
Currently, the program allows for a maximum $35,000 withdrawal and the participant has to begin repayments after a 1 year grace period.
For first time buyers who have been diligently saving in their RRSPs and have the funds available, this will allow an extra $25,000 to go towards a house purchase. And once the 30 year amortization option comes into effect later this summer, the combination could allow for an extra $50k+ in purchasing power towards a newly built home.
