30-year amortizations on insured mortgages for new build homes now available for first-time buyers

First-time buyers of new construction homes in Canada will now be able to access longer mortgage amortization periods.

As of August 1st, 2024, lenders will be allowed to offer 30-year amortizations for insured mortgages to first-time homebuyers of new construction homes, a measure modified by  the federal government. Previously, the maximum amortization for an insured mortgage — a mortgage that has a down payment less than 20% and therefore requires mortgage insurance — was 25 years. Homes priced at and over $1 million automatically require a 20% downpayment and an uninsured mortgage loan.

The federal government says that by spreading payments out over an additional five years, this will help to lower monthly mortgage payments, therefore making housing costs more affordable for young Canadians, in addition to incentivizing the construction of much-needed supply.

“For every young Canadian who wants to own a home of their own, we want them to be able to qualify for a mortgage and afford their first home. One of the biggest hurdles to homeownership for younger Canadians is qualifying for a mortgage and affording the monthly payments,” said Chrystia Freeland, Deputy Prime Minister and Minister of Finance, in a press release. “That is why, starting August 1, first-time buyers of new builds will be able to reduce their monthly payments with up to 30 year mortgages. This is just one of the many new measures our government is taking to make the dream of homeownership a reality for younger Canadians.”

What do I need to qualify for a new build 30-year amortization?

If you’re a first-time buyer shopping for a new construction home and plan to take out a 30-year mortgage, here are some of the requirements you’ll need to keep in mind.

• At least one of the borrowers on the application must be a first-time homebuyer – they’ve never purchased a home before, and they have not occupied a home as a principal residence that either they or their current spouse or common-law partner have owed in the last four years
• The home being purchased must be newly-constructed, meaning it has not been previously occupied for residential purposes
• Only high-ratio mortgages will be applicable — mortgages were the loan amount exceeds 80% of the home price (has a down payment less than 20%)
• All other eligibility criteria for government-guaranteed mortgage insurance will still apply

Thirty-year amortizations for insured, new build mortgages were first announced in the 2024 federal budget released earlier this year, alongside other affordable housing measures. Read more about all of the proposed housing measures here.

 

Source:

Michelle McNally

Communications manager, Royal LePage