Liberal plan for 30-year mortgage amortizations kicks in. Here’s who qualifies
Some Canadians looking to break into the housing market are now able to get 30-year mortgages, a bid from the Liberal government to make owning a home feel more affordable.
Experts who spoke to Global News say that while some homebuyers are likely to see their borrowing power increase because of the new regime, the overall impact on housing affordability is likely to be limited.
As of Thursday, some first-time homebuyers will be able to stretch the amortization, or the length it takes to pay back the entirety of the mortgage loan, to 30 years, up from the standard term of 25 years in Canada.
The idea here is that, for Canadians who can’t afford the monthly costs of a mortgage, paying back the full amount over a longer time period will help to reduce the size of regular payments.
Finance Minister and Deputy Prime Minister Chrystia Freeland announced these changes as part of the 2024 federal budget unveiled in April. Earlier this week, she told reporters that the change coming into effect Thursday is part of a suite of measures aimed at improving housing affordability for Canadians boxed out of the housing market.
“That translates to lower monthly payments so more younger Canadians can afford to pay that monthly mortgage on a new home. This is just one of several measures that our government is taking to help younger Canadians save for that first down payment and afford a home of their own,” she said.
Victor Tran, mortgage and real estate expert with Ratesdotca, tells Global News that tacking an extra five years onto the mortgage will likely increase a homebuyer’s borrowing power by “roughly” five per cent, allowing would-be owners to potentially qualify for a larger mortgage.
Robert Kavcic, senior economist with BMO, says
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