Canada's 30-year mortgage option has officially launched

The Canada Mortgage and Housing Corporation (CMHC) has officially launched Home Start, a 30-year mortgage option for first-time homebuyers purchasing newly constructed homes.

The move follows the federal government’s Budget 2024 announcement to amend mortgage rules, allowing extended repayment terms to make housing more affordable for new buyers.

“CMHC’s new Home Start product will provide mortgage loan insurance to first-time homebuyers of new builds with 30-year amortizations,” the crown corporation said in a media release. “This will help open the door for more Canadians to purchase their first home by allowing an additional five years to pay off their mortgage, thereby lowering monthly payments.”

The program applies to all new housing types, including manufactured homes, as long as it’s a new construction.

However, some experts are skeptical about the program’s impact on affordability, especially in high-priced markets.

Victor Tran, a mortgage and real estate expert at RATESDOTCA, believes the new rules may not significantly benefit buyers in cities like Toronto and Vancouver.

“I don’t think a lot of people will be able to take advantage of it,” Tran told Canadian Mortgage Professional in a recent interview. “Especially in markets in the GTA [Greater Toronto Area] or in Vancouver, most of the new builds are over $1 million, and most builders require at least 20% of a deposit anyway – so automatically, those homebuyers won’t even qualify. It’d be difficult to find a new build for less than $1 million [in those markets].”

CMHC typically offers insured loans only for homes priced below $1 million, and mortgag

e insurance is generally not needed for purchases with a 20% down payment. This restriction limits the number of buyers who can benefit from the new 30-year amortization plan.

Tran pointed out that while the extended amortization might seem attractive, its actual impact on affordability will be modest.

“It looks good [but] politics aside, I don’t think it’s going to do much,” he said. “Affordability will improve a little bit because of the 30-year amortization at lower payments. Borrowing power will increase slightly – not as much as what most people hope for, though. It’s roughly a 3% to 5% increase in your borrowing power, really not that much at the end of the day.”

CMP

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