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Encouraging First-Time Ownership: 30-Year Amortization Periods in the Canadian Market
Following changes to the Canadian Mortgage Charter, the Federal government is introducing mortgages with 30-year amortization periods to the Canadian market. The product was made available to borrowers who submitted their mortgage applications starting on or after August 1, 2024.
However, the new rules don’t apply to everyone. The Federal government introduced a 30-year amortization period to help first-time homebuyers enter the market.
First-Time Buyer
To qualify, at least one borrower listed on an application must be a ‘first-time buyer’. This means that they cannot have ever:
- purchased a home in Canada or elsewhere; or
- occupied a principal residence owned by a spouse.
Conversely, the applicant may have occupied a principal residence owned by a spouse where there was a breakdown in the marriage or common law partnership which resulted in a completion of their occupancy.
Newly Constructed Home
The second important requirement concerns the type of home applicable to the program. The home must have never been occupied previously for residential purposes.
Critically, this requirement does not exclude interim occupancy condominiums. Due to the focus on residential occupation, it may also include model homes used for commercial purposes.
High-Ratio Mortgages
The third element of the program places parameters on the size of the mortgage relative to the subject home’s value. According to a news release from the Department of Finance, the new amortization period may only apply to ‘high-ratio mortgages. High-ratio mortgages mean the amount secured by the mortgage exceeds 80% of the home’s purchase price.
Final Guidance
The 30-year amortization period finds authority at page 67 of Budget 2024 – which in turn refers to it as a revision of the Canadian Mortgage Charter.
The Canadian Mortgage Charter was published at page 28 of the Federal government’s 2023 Fall Economic Statement. It restates the Financial Consumer Agency of Canada’s “Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances”.
Beyond the reference made in Budget 2024 and a June 11, 2024, Department of Finance news release, the 30-year amortization period currently lacks specific statutory, regulatory, or departmental authority.
This may change in the coming months, but not without leaving applicants and observers wanting final guidance.
Contact Us
If you have any questions about the new 30-year amortization period or how it may affect your mortgage options, please contact us. Our experienced real estate group is here to guide you through the complexities of mortgage regulations and property transactions.
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