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The federal government has discontinued the First-Time Home Buyer Incentive, a much-criticized program aimed at improving housing affordability for new buyers that saw muted uptake in major markets.

Canada Mortgage and Housing Corporation (CMHC), the national housing agency, said in a statement on its website that the program was winding up, with no new or updated submissions to be accepted after midnight ET on March 21.

Applications resubmitted after that date will be subject to a manual review, with review requests to be submitted no later than midnight ET on March 25 and no new approvals to be granted after March 31.

Introduced in 2019, the Incentive was aimed at reducing monthly mortgage payments for qualified first-time buyers through a shared-equity scheme. It offered a contribution of 5% or 10% towards the purchase of a newly constructed home, and 5% of the purchase of a resale existing home or new/resale mobile or manufactured home.

Still, that shared-equity component, which meant the government would also benefit from the potential future sale of a home, proved unpopular with buyers, who would have to repay the Incentive either after 25 years or upon sale.

The program faced challenges from the off. In 2020, federal Conservative MPs Tom Kmiec and Stphanie Kusie slammed its cost and low levels of consumer interest, urging CMHC to topdeo the scheme,  after an annual report showed its uptake lagged far below projections.

Mortgage Professionals Canada (MPC) also criticized the Incentive at its 2022 summit, when vice chair Veronica Love said the scheme was “simply failing” with data showing participation in the program was less than a third of what the government had originally envisaged.

Between its launch in September 2019 and the end of March 2021, the program had seen  LESS THAN 10,000 sucessfull applicants across Canada with Edmonton and Calgary accounting for nearly 2,000 of that total.

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Exploring Mortgage Amortization Extensions
 December 7 2023     Posted by John C Filice


Recent inflation numbers indicate that inflation is slowing, and many economists are saying that the most recent drop in the inflation rate will give the Bank of Canada the slack that it needs to hit pause on any rate hikes for the time being. While this is a positive sign, it is not necessarily translating to relief in the cost of living. Many people are still seeking solutions to mitigate the effects of sky-high grocery prices and other goods on their finances. This month, we are focusing on one strategy that could prove to be the difference maker in providing the financial breathing room you need mortgage amortization extensions.

To start, let us clarify what an amortization period is. It represents the duration it takes to fully pay off your mortgage through regular payments. An amortization extension, on the other hand, refers to any period beyond your initially qualified amortization.

Which lenders and banks offer amortization extensions?

Prime lenders, who are federally regulated, typically do not offer amortization extensions beyond 30 years. However, if your current mortgage has a shorter amortization period (i.e.: 20 years), you can extend it when refinancing with them. Alternative mortgage lenders, often referred to as "non-bank" lenders, may offer extensions of 35 to 40 years, provided you have at least a 20% down payment or more than 20% equity built up.

Who can extend their mortgage and why?

First-time home buyers are typically limited to a maximum amortization period of 25 to 30 years. Most put less than 20% down needing default mortgage insurance that restricts amortization to a maximum of 25 years. However, if they have 20% or more to put down, they can extend the amortization beyond 25 years.

In contrast, renewers may have the option to extend their amortization at the time of renewal. For example, they can go from 20 years back to 25 years or from 25 years back to 30 years to lower their monthly payments. Keep in mind that these options vary based on individual situations.

It is important to understand that extending your mortgage amortization outside of renewal would require refinancing, which may incur penalties and necessitate requalification at current rates. Nevertheless, refinancing can be a viable solution in certain circumstances. To explore your options fully, I recommend discussing your specific needs with me.

For example...

Imagine a young couple bought their first home 5 years ago with a $750,000 mortgage at 3.5% interest. They initially chose a 25-year amortization, making a monthly payment of $3,745. Now, at renewal, their balance is $635,000 with rates at 5.39%. They're considering extending their amortization to keep their monthly payment the same. Let's compare the numbers:

Amortization Monthly Payment Impact on Monthly Budget
20 yrs $4,409 -$664
25 yrs $3,926 -$181
30 yrs $3,622 +$123
35 yrs $3,419 +$326
40 yrs $3,278 +$467

The rates shown are for illustration purposes only and subprime lenders' rates over 30 years amortization may differ.
 

Extending your mortgage amortization can be an effective financial strategy, but as with any important financial decision, it is essential to weigh the risks and benefits carefully. If you have any questions or would like to explore your options further, please reach out to me.

 

2023 Fall Economic Statement: What You Need to Know

Deputy Prime Minister and Minister of Finance, Chrystia Freeland, released the Fall Economic Statement on November 21, 2023. Here is an overview of key housing measures that may affect you:

  • Making housing more affordable: The federal government acknowledges the need for long-term housing solutions. To address short-term rentals, starting January 1, 2024, deductions for expenses related to short-term rentals may be denied in areas where they are prohibited.
     
  • Underused Housing Tax (UHT): Introduced in 2022, UHT imposes a one percent tax on non-resident, non-Canadian owned vacant or underused residential real estate. Recent changes:
    • Excluded Owners: Certain Canadian entities may become excluded owners.
    • Penalty Reduction: Minimum penalties for late UHT filing have been lowered.
    • Extended Deadlines: The deadline for filing UHT returns for 2022 and 2023 has been extended to April 30, 2024.
       
  • Canadian Mortgage Charter: A new Canadian Mortgage Charter is in the works to regulate financial institutions during elevated interest rates and financial stress. Key relief measures:
    • Temporary extensions of mortgage amortization periods.
    • Waiving fees for relief measures.
    • No requalification under the insured minimum qualifying rate when switching lenders.
    • Early contact before mortgage renewal.
    • Options for lump-sum payments or selling the principal residence without prepayment penalties.
    • No interest on interest during mortgage relief measures.

These changes can impact your housing decisions. For personalized guidance or questions, reach out to me, your trusted mortgage broker.


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