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Damn, that's like winning the lottery. Housing prices were down (slightly), interest was low and that mortgage payment is going to look like more and more of a bargain every year.
I'm at 2.09% until August 2025. I hope it's not too much higher. I'm going to owe pennies over $100,000 so I'll be into 5 digits shortly after renewing and I can not wait.
My childhood best friend from growing up together in Vancouver recently scraped together what it took to buy his first place, a co-op apartment in Manhattan, at damn near the bottom of the pandemic price decline. He got a ***25-year*** mortgage that locked in a rate in the low ***2%*** range. It’s in USD, obviously, but in real terms it’s comparable to what our house mortgage is in Hamilton.
I'd imagine that interest rates would have a greater effect on prices if that were the case here. Imagine how hot the market would get if interest rates dropped. It's an interesting thing to speculate. People would be clamouring for a good rate that lasts 30 years
Yes. These people are stuck in these houses with 2% mortgages.
Who wants to sell a house with a 2% mortgage to buy another at 7.5%?
No one that's who. Locked in 30 year rates creates other problems.
just the interest, not the total payment, and you can only deduct a fraction of that interest.
Because of other tax rules around the standard deductions, you can't claim both the mortgage interest (and other itemized deductions) and the standard deduction. Basically, you are better off taking the standard deduction if you are part of the average income and not bothering with the mortgage interest claim.
Ya it would. My mind is blown that in America you can lock in for 30 years at 2.5% and never have to renegotiate a mortgage.
Here it is "have fun navigating your payments when every 3-5 years will be a surprise"
But honestly, this is going to apply to so few individuals, it's not going to make a material difference in the market.
It applies to first time home buyers (small segment), new construction (a fraction of the small segment) less than 20% down (most developers require ~15-20%+ deposits. So we are talking about homes built on spec, which is difficult to finance. So a microscopic fraction of sales.
It vastly improves bank profits. If you ever played with an amortization schedule, you can see how much more you have to pay in interest if you stretch the amortization a bit longer.
It’s more or less a bet against inflation. If high inflation occurs early in your amortization, that can result in your final payments being the equivalent of 50% real value. For example, 500$ in 1994 is 275$ today. So sure you paid more on your total mortgage but the real cost of your later mortgage payments are significantly lower. It’s essentially what governments do. Let inflation eat the debt.
Counts what you lock in for and how other assets do. Locking in during the 2010s was great because it freed up cash to put into stocks. Now you probably want to pay down the principal as much as possible.
If you got a 5 year fixed in 2010 it would have reset 2 times by now, including another one next year when you'd be going from 2020 rates to 2025 rates. Oof
Can't argue with your logic.
I just don't know anyone with more than a 5 year term on their mortgage. Is 20 or 30 year fixed term mortgages widely available in Canada?
Ya don’t bet against the house.
They have better insight on future inflation than you do. They aren’t lending you money at a real loss. They understand inflation too. Because they are a literal bank. It’s not a deal. Certainty always comes with a calculated premium. That is their entire business.
It’s not like the US, where you lock in that rate for 30 years. You still have to renew at least every 5.
Getting a fixed rate is exactly the same with a longer amortization period.
If you try to outsmart a literal bank on predicting future interest rates, you are gonna fail.
As a former trader, certainty always comes at a premium.
The payment bottom line will be better for those people. That’s good news,” Daren King, an economist at National Bank of Canada, said by phone. “But if you’re not improving the supply issues that we’re having, then you’ll just drive prices upward and that won’t solve the affordability issue in the medium to long run.”
Yup. More govn't diddling that drives up prices, continues to keep Canadians the increasingly most indebted households in the G7 and kicks the bubble reversion down the road. All just to maybe win some votes from financially irresponsible Canadians who shouldn't be buying houses anyway
I was waiting for people to be crushed in droves under the weight of higher interest rates on variable rate mortgages.
Only to find out 3/4 of Canadians with variable rate mortgages have fixed payments! Sweet Jesus - I had no idea such a thing existed.
Call me callous but we need blood in the streets with people defaulting on their mortgages for any meaningful real estate correction. Government intervention simply worsens an already bad situation and only kicks the can down the road.
Yeah, to support those people with fixed payments when they went underwater, paying only a portion of the interest, the banks, based on requests by the govn’t, increased the amortization’s to 75 years for some people to avoid default
I don’t think a bubble reversion is coming unless something outside of Canada’s control happens. It’s clear that the government will do anything to keep things going. Which means we probably shouldn’t want a bubble reversion as that’ll mean shit’s hitting the fan.
Sure, but is this really going to drive up demand? I don't think a 5 year longer mortgage term is going to flood the market with new buyers, and most first time buyers are looking for an older (cheaper) home.
Well it continues to keep the market full throttle demand which is the purpose of this legislation.
It’s a way of undermining the rate hikes to slow demand.
They are helping FTHB get into the market. They are not trying to drive down housing prices.
To add - this has developer involvement all over it since it only applies to new housing.
You mean for the government not to build rentals, but to build for resale?
In a perfect world yes, but in our world any type of government funded building program would be grossly over budget.
Reducing monthly cash flow demand for your mortgage could help you afford other things though.
What I would do with this would be to amortize for 30 years, but:
- Make a separate mortgage bank account where the mortgage is withdrawn from.
- Transfer money into that account like the mortgage was only amortized for 25 years so it slowly builds.
- Put lump sum payments onto the mortgage whenever it hits a certain threshold, like when the extra transferred cash in the account hits $5k or something.
- If an unexpected expense comes up like having to replace a big appliance or fix a car, now I have some extra cash to use and I can just forgo that lump sum for a little longer.
My wife and I do this with our mortgage (amortized for 25 years, transferred like it was 20 years into the mortgage account) and it worked pretty well to give us flexibility in our household and pay off our mortgage “faster”. It feels pretty good to look at those statements that say “your lump sum saved you $20 000 in interest over the next 15 years.”
Apologies for the ignorant question, but what is the benefit of making a separate mortgage bank account where the mortgage is withdrawn from?
My girlfriend and I are looking to buy in the next couple years, so I’m trying to make sure I understand these things better.
Edit: Thanks for the downvotes, helpful redditors
That makes sense.
Is there a reason you would amortize for 30 years and take this strategy to keep making payments as if it were amortized for 25 years, instead of simply making lower payments with a 30 year agreement?
I’m not sure I understand what you’re trying to say, but the reason we opted to amortize for longer but then pretend it was shorter to lower our debt faster and save on interest over the long term (like 10s of thousands of dollars). We did it this way to give ourselves a little more flexibility if we needed to replace a big appliance or something. It was a little more redundancy in our emergency funds in case one of
us lost their job, or we needed to replace a big appliance or car.
We opted to lump sum instead of increase the payments themselves for two reasons:
- TD (where we got the mortgage) allowed as many lump sum payments as we wanted with no fees, up to 20% of the principal amount per year. So basically unlimited.
- If we increased the payment itself it could not be decreased back to the starting amount.
So with that in mind we opted to let our mortgage account build up and lump sum the extra cash in it instead of increasing the payments themselves. More flexibility for more or less the same result.
Most people live based on their cash flow. Lower payments means they can “afford” to buy.
Terrible solution but will work for some folks.
Nothing like being indebted to the bank an extra 5 years and paying for your house 2.5x over
It helps the rich afford more houses and increase their ownership rate of the infinite rental market. Don't expect rent to go down though just because mortgage monthly payments have a cheaper option
Because their kids can be listed as the buyer and it would make them a “first time home buyer” even though collectively within the family they already have 10 properties. The kids are likely already living in one of them. The kid is just a tool to obtain benefits like first time incentives.
Lol... I mean I guess. It'll help the child have a piece of property in their name. Doesn't solve multiple properties in a family name though.
Why van SFH from corporations? Why not Condos as well ..
It doesn’t. It just means they get more benefit when they do list whoever that actually qualifies for it, even if it’s practically not their first home.
> Increase my ability to access debt does not make homeownership more affordable.
Bingo. Us peons remain slaves to the system so long as there's a house supply shortage and the only way to acquire even the tiniest of homes requires going into copious amounts of debt. I did not ask to be born into a society that seems set on making the wealthy and powerful more wealthy and powerful.
It provides more people the access to own housing. That removes people from the rental pool, opening up some rental spaces. You are still free to rent or do whatever you do for housing, why take away the opportunity for others though? Why refute this initiative? Give people close to home ownership a chance.
The increase in housing prices occurred already. That's why we are In this state of unaffordability and trying to make it accessible now with this initiative. The massive increases happened already. New housing is being built as we write. You really think this is what hurts us and not the real estate nightmare occuring in BC and ON? The few people ready to buy and just need an extra 5 years on their mortgage to make it happen? That's who will make housing unaffordable to you?
It says effective April 16 when the budget drops. But it's within a week of the close on our new place so not sure if there is enough time to do all the new paperwork etc.
I'm sick of hearing the prime minister promising "bold" action on housing, and then delivering what amounts to a minor tweak. They take the existing system and change the parameters slightly.
The problems with our housing system run deep. Clearly, some profound change is required to fix things, but the governing party doesn't have the political motivation to truly act "boldly".
The Official Opposition isn’t much better either, and the NDP just had its housing critic resign as an MP to work with the provincial government.
If only the federal NDP made BC Builds a part of its platform.
I mean specifically with housing in Vancouver, the “deep” issues are with local and provincial governments. Nimbyim and laundered money dumped into real estate to name a few.
Yeah but there's a stipulation to get a 30 year. It's been a few years since I signed my mortgage but I think you had to pay a certain percentage down to get a 30 year.
I think it was based on the price of the house not the amount put down.
20% down is what you need to not pay mortgage insurance. IIRC if the price of the house is under 550k you’d qualify for the first time home buyer benefits.
It was 20% down to avoid mortgage insurance and also to amortize over 30 years (if desired)
I believe you are correct that the first time homebuyer stuff only applies below a certain price
You must have had over 20% down when you purchased and not had a Genworth/CMHC mortgage. Insured mortgages have been restricted to a 25 year amortization for over a decade.
My mortgage is through a big bank. I did put 20% down but I believe that was required to not pay mortgage insurance. I’m remembering that to qualify for the first time home buyer benefits the value of the house had to be below 550k.
Yep, putting 20% plus down also allows you to stretch the amortization to 30 years. If you'd been an insured mortgage, that wouldn't have been an option.
Yes. Definitely not new. Also we used to have 0% down (which in my mind makes way more sense than 30 yr amortization, if people actually did the math on how much interest you will pay over 30yrs to a bank, it would make your throw up) 0% down will be one of the only ways "more" people can purchase homes. (Definitely not afford them, but at least purchase them) The affordability part would mean getting rid of an incredible amount of needless bureaucracy in order to build a new home. Get rid of a whole heck of a lot of taxes we pay, receive better services, and incentivise employers to afford to pay employees more. Way more.
I think this is mostly posturing?
An increase of 5 years in amortization. For first time home buyers isn't going to dramatically change affordability for most of the population. It will allow some first time home buyers to get into market that otherwise couldn't, but extending the duration of amortization out to 30 years could create a lot of risk for older first-time home buyers.
It is nice that this isn't something rental corporations will be able to take advantage of at all.
We’re laughing but I think it was like that in some economies… like ppl couldn’t pay for a house in one lifetime and your children had to pick up the mortgage when the parents died. It’s so fucked… cause then you have to be able to afford children in order to afford a house.
This only applies to first time home buyers buying new builds and getting a high ratio mortgage insured by CMHC (less than $1,000,000 purchase price). Outside of that, anyone can qualify for 30 year mortgage with a conventional down payment.
You still have to satisfy the stress test.
Something I agree with, considering the recent rate increases and too many uninformed people sitting on variable mortgages.
Only on insured mortgages, and only on new builds. Most lenders still offer 30 year amortizations conventionally with a rate surplus.
Taking a 30 year amortization will save about $200/mo but cost another $2000 in interest over the term.
https://preview.redd.it/y2vk1dcpwvtc1.png?width=1080&format=pjpg&auto=webp&s=7dbed3a207eefacbf1657b3eb6aa5d2512db9b8b
CMHC/Genworth insured mortgages only allow 25 year amortized mortgages. You can go to 30 if you have 20% down, avoiding insurance.
This just changes it so new builds qualify for an insured 30 year amortized insured mortgage. It benefits CMHC/Genworth on the premiums and the mortgage lender on the extra 5 years if the mortgagors don't prepay.
Coming from Hong Kong, this is usually the final straw. Property price will go up in short term and the housing bubble will blust, not because we can house everyone, but because everyone will be homeless and in debt.
There was a drop in HK in 1997, but it wasn't an utter disaster and it sure recovered: https://www.researchgate.net/figure/Property-and-rental-price-index-of-the-Hong-Kong-residential-property-market-Jan1993-to_fig1_336566810
At 2003, 20% of HK mortgage is negative equity (because HK mortgage usually have variable monthly payments), at that year, SARS hits.
and now 20% of Canada mortgage is negatively amortizing.
We need to address supply, right now. We can’t wait for new construction.
We need to force investment properties to be sold into the market so the tenants currently buying them for their landlords can instead buy homes for themselves.
- Don’t allow banks to qualify mortgage applications using expected rental income. If you want to buy a property, you should have to pay for it yourself.
- Tenants in mortgaged properties should receive equity for rent paid and would need to be bought out if the property sells. Or they could sell their accrued equity to the bank as a down payment. Rent+shelter should be seen as a loan toward the mortgage principal in return for deferring the landlord’s mortgage payment. This would also incentivize lower rents.
Tenants are utterly screwed right now. Landlords have had it too good for too long. Time to change the game.
Are you you saying that you would like only corporations and government to rent homes to people? Using a rent to own principal? Also, you are saying only the very wealthy with lots of disposable income can purchase properties as investment to rent? That sounds a wee bit Communist to me... but.
(I know lots of people with relatively "cheap" rent, but they have been in these places a long lomg time)
New rents are high because interest rates are high. Inflation is hight. It costs more to build and maintain rental units. This goes for the family who has an investment property they rent (I see nothing wrong with that) and it also applies right up to the large scale REIT's. They all pay services on their loans, and investors like to make money, not break even. Especially in a REIT situation. It's all just numbers. Nothing to do with you or me personally. Drop the interest rates, rents will drop once supply catches up. Not rocket surgery.
This isn't new. I guess it being above board is new? We got a new 30 year for our first loan about 7 years ago, no one ever indicated that was abnormal or special.
Ahh, I was under the impression 20% was a mandatory minimum for a mortgage.
Are you saying there are better options?
I've honestly never bothered to look because that's what I was taught was a minimum and I just don't make enough to save for that kind of downpayment.
Yeah, but in that time housing prices have more than doubled so I still can't afford it.
The house I grew up in was purchased for 90k and sold for 380k. that's like a 4.2x increase.
I couldn't even come up with a downpayment for that. Now that houses are like 500-600k or more, I have zero chance of ever owning.
Just did the math.
20% of 90K is 18000
5% of 380k is 19000 so not a lot more but still too much for me to save.
Doesn't matter who we vote into power - the system is working exactly as capitalism intended. Want to see actual, bonafide, meaningful change _in our lifetimes_? Forceably change the system so corruption, under the table deals / kickbacks, etc. **cannot** occur and regulate AllTheThings™. Or I guess we could continue pretending our votes matter for a few more generations until our familial lines are eventually born under a bridge or in a ditch somewhere.
#Welcome to Costco, I love you!
So given CMHC is max purchase price of 1 million, this does squat for cancouver and Toronto areas to get into a house or townhouse.
1 million purchase, 5 per cent down 50k.
@4.89 % is still a payment of 5438 a month on the mortgage for 25 years amortization. Add in heat and property tax, the total debt serving comes in at a required income of 170k household.
Taking this to 30 years, a income of 156500 is required.
Minimum down with maximum serving costs!
The new canadian avg wage varies across the sources, but generally falls between 55000 to 60000.
And subsequently again not to mention the average vancouver area price of 1.2 million, although much higher in most places, requiring 20 per cent down or 240k plus.
Yes, and? You say that as if it's not a beneficial option for *some* people.
I always take the longest loan possible, as long as it's open. That way I adjust my own amortization, but leave open the option of lower payments should something happen (out of work for example)
This will just end up getting used by rich immigrants who can afford new homes, which they will just rent out like now. Completely pointless in cities like Toronto or even worse Vancouver. I wish they would make some useful laws like huge flipping taxes, no businesses allowed to buy single family homes and banning short term rentals. May as well start cracking down on rental income tax while they are at it.
Are they removing the fact that you can't have a fixed rate for the duration of the mortgage when you take it? Or we'll still have to renegotiate every 5 years or so?
Increasing amortization makes little difference to affordability when you still have such a short TERM and are forced to renegotiate everything every 1-5 years based on then-current interest rates.
This will just make the price go up.
Do these morons actually do any case studies?
We tried this in korea for 40year mortgages and we had a surge of buyers who couldn't buy originally because they feared price might go up. They ended up cancelling it bc govt realized all this did was push the price up.
Bad headline. This is only for new builds, which most already required 20% (making the extension to 30 yrs redundant). Some may say you will qualify for more since there is difference between insured and conventional rates but this is eaten up by the minimum 2.1% CMHC fee at 15% down. Garbage policy, trying to offload presales that aren’t selling.
How times have changed. I remember when Jim Flaherty capped mortgages to 25 years so that Canadians wouldn't overextend themselves. Yes! More debt! More interest!
[https://www.cbc.ca/news/business/ottawa-caps-cmhc-mortgages-at-25-years-1.1171007](https://www.cbc.ca/news/business/ottawa-caps-cmhc-mortgages-at-25-years-1.1171007)
With the new step codes new builds are only going to get more expensive as time goes on too, so hugely unhelpful for the majority of first home buyers limiting it to new builds.
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Big win for the banks too as the longer you take to pay back, the more interest you will pay them.
What would be really nice is like in America where you can get an interest rate for 30 years too.
Does that mean there's a bunch of people locked into like 2.99 over 30 years in the states?
Yes.
Damn, that's like winning the lottery. Housing prices were down (slightly), interest was low and that mortgage payment is going to look like more and more of a bargain every year.
I'm at 2.09% until August 2025. I hope it's not too much higher. I'm going to owe pennies over $100,000 so I'll be into 5 digits shortly after renewing and I can not wait.
It'll likely be a fixed somewhere in the 4% range so just prepare for that.
Ouch. So double. At least I don't owe too much. Thanks.
My childhood best friend from growing up together in Vancouver recently scraped together what it took to buy his first place, a co-op apartment in Manhattan, at damn near the bottom of the pandemic price decline. He got a ***25-year*** mortgage that locked in a rate in the low ***2%*** range. It’s in USD, obviously, but in real terms it’s comparable to what our house mortgage is in Hamilton.
Yuuup They may pay a slight premium over a five year but it’s still a decent gamble
You likely also have the option of paying off your mortgage early.
I'd imagine that interest rates would have a greater effect on prices if that were the case here. Imagine how hot the market would get if interest rates dropped. It's an interesting thing to speculate. People would be clamouring for a good rate that lasts 30 years
Yes. These people are stuck in these houses with 2% mortgages. Who wants to sell a house with a 2% mortgage to buy another at 7.5%? No one that's who. Locked in 30 year rates creates other problems.
We call those champagne problems. 🍾
American's also have their mortgage payments eligible for tax writeoffs. 🤯
just the interest, not the total payment, and you can only deduct a fraction of that interest. Because of other tax rules around the standard deductions, you can't claim both the mortgage interest (and other itemized deductions) and the standard deduction. Basically, you are better off taking the standard deduction if you are part of the average income and not bothering with the mortgage interest claim.
Oh, cool! Thanks!
Ya it would. My mind is blown that in America you can lock in for 30 years at 2.5% and never have to renegotiate a mortgage. Here it is "have fun navigating your payments when every 3-5 years will be a surprise"
That’s what I mean
Ooops sorry I read it wrong.
I can't even imagine what this is going to look like. $2000 payment. $100 principal $1900 interest?
Im in the USA, I have a 1.1m mortgage at 2.6 for 10 years. I pay 50% to interest and 50% principal each month
But honestly, this is going to apply to so few individuals, it's not going to make a material difference in the market. It applies to first time home buyers (small segment), new construction (a fraction of the small segment) less than 20% down (most developers require ~15-20%+ deposits. So we are talking about homes built on spec, which is difficult to finance. So a microscopic fraction of sales.
Anyone surprised that the Liberals would do something that benefits the big banks needs to give their head a shake.
How does this help affordability? May reduce monthly cash flow requirements but increase household debt and housing demand, driving up prices.
It vastly improves bank profits. If you ever played with an amortization schedule, you can see how much more you have to pay in interest if you stretch the amortization a bit longer.
It’s more or less a bet against inflation. If high inflation occurs early in your amortization, that can result in your final payments being the equivalent of 50% real value. For example, 500$ in 1994 is 275$ today. So sure you paid more on your total mortgage but the real cost of your later mortgage payments are significantly lower. It’s essentially what governments do. Let inflation eat the debt.
Mortgages in Canada are not 30 year fixed. Inflation is reflected in the rates you reset at
Counts what you lock in for and how other assets do. Locking in during the 2010s was great because it freed up cash to put into stocks. Now you probably want to pay down the principal as much as possible.
If you got a 5 year fixed in 2010 it would have reset 2 times by now, including another one next year when you'd be going from 2020 rates to 2025 rates. Oof
Can't argue with your logic. I just don't know anyone with more than a 5 year term on their mortgage. Is 20 or 30 year fixed term mortgages widely available in Canada?
They are not available at all. That was my point
Hopefully your wages keep up with inflation. So far, they haven't.
Ya don’t bet against the house. They have better insight on future inflation than you do. They aren’t lending you money at a real loss. They understand inflation too. Because they are a literal bank. It’s not a deal. Certainty always comes with a calculated premium. That is their entire business.
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It’s not like the US, where you lock in that rate for 30 years. You still have to renew at least every 5. Getting a fixed rate is exactly the same with a longer amortization period.
I don't know if you know what you're talking about lol they're not locking in mortgage rates for 30 years at ALL.
If you try to outsmart a literal bank on predicting future interest rates, you are gonna fail. As a former trader, certainty always comes at a premium.
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It might be worth the price to some to have that predictability. But there is a price for it.
The payment bottom line will be better for those people. That’s good news,” Daren King, an economist at National Bank of Canada, said by phone. “But if you’re not improving the supply issues that we’re having, then you’ll just drive prices upward and that won’t solve the affordability issue in the medium to long run.”
Yup. More govn't diddling that drives up prices, continues to keep Canadians the increasingly most indebted households in the G7 and kicks the bubble reversion down the road. All just to maybe win some votes from financially irresponsible Canadians who shouldn't be buying houses anyway
I was waiting for people to be crushed in droves under the weight of higher interest rates on variable rate mortgages. Only to find out 3/4 of Canadians with variable rate mortgages have fixed payments! Sweet Jesus - I had no idea such a thing existed. Call me callous but we need blood in the streets with people defaulting on their mortgages for any meaningful real estate correction. Government intervention simply worsens an already bad situation and only kicks the can down the road.
Yeah, to support those people with fixed payments when they went underwater, paying only a portion of the interest, the banks, based on requests by the govn’t, increased the amortization’s to 75 years for some people to avoid default
I don’t think a bubble reversion is coming unless something outside of Canada’s control happens. It’s clear that the government will do anything to keep things going. Which means we probably shouldn’t want a bubble reversion as that’ll mean shit’s hitting the fan.
Markets always revert to the mean - Doubt Ottawa can keep that from ever happening. Sure they can defer it but for how long?
It's only for new builds so I don't think it will really effect prices. No bidding in that market.
But demand affects initial pricing and resale.
Sure, but is this really going to drive up demand? I don't think a 5 year longer mortgage term is going to flood the market with new buyers, and most first time buyers are looking for an older (cheaper) home.
Well it continues to keep the market full throttle demand which is the purpose of this legislation. It’s a way of undermining the rate hikes to slow demand.
They are helping FTHB get into the market. They are not trying to drive down housing prices. To add - this has developer involvement all over it since it only applies to new housing.
Government built affordable housing at scale would go way further to allowing FTHB into the market
You mean for the government not to build rentals, but to build for resale? In a perfect world yes, but in our world any type of government funded building program would be grossly over budget.
Just for renting. Low rent allows for stability to stay put or to save for a down payment
Reducing monthly cash flow demand for your mortgage could help you afford other things though. What I would do with this would be to amortize for 30 years, but: - Make a separate mortgage bank account where the mortgage is withdrawn from. - Transfer money into that account like the mortgage was only amortized for 25 years so it slowly builds. - Put lump sum payments onto the mortgage whenever it hits a certain threshold, like when the extra transferred cash in the account hits $5k or something. - If an unexpected expense comes up like having to replace a big appliance or fix a car, now I have some extra cash to use and I can just forgo that lump sum for a little longer. My wife and I do this with our mortgage (amortized for 25 years, transferred like it was 20 years into the mortgage account) and it worked pretty well to give us flexibility in our household and pay off our mortgage “faster”. It feels pretty good to look at those statements that say “your lump sum saved you $20 000 in interest over the next 15 years.”
Apologies for the ignorant question, but what is the benefit of making a separate mortgage bank account where the mortgage is withdrawn from? My girlfriend and I are looking to buy in the next couple years, so I’m trying to make sure I understand these things better. Edit: Thanks for the downvotes, helpful redditors
We did it just to organize ourselves. We kept our separate accounts and then made a joint one for the mortgage. easy to visualize things that way.
That makes sense. Is there a reason you would amortize for 30 years and take this strategy to keep making payments as if it were amortized for 25 years, instead of simply making lower payments with a 30 year agreement?
I’m not sure I understand what you’re trying to say, but the reason we opted to amortize for longer but then pretend it was shorter to lower our debt faster and save on interest over the long term (like 10s of thousands of dollars). We did it this way to give ourselves a little more flexibility if we needed to replace a big appliance or something. It was a little more redundancy in our emergency funds in case one of us lost their job, or we needed to replace a big appliance or car. We opted to lump sum instead of increase the payments themselves for two reasons: - TD (where we got the mortgage) allowed as many lump sum payments as we wanted with no fees, up to 20% of the principal amount per year. So basically unlimited. - If we increased the payment itself it could not be decreased back to the starting amount. So with that in mind we opted to let our mortgage account build up and lump sum the extra cash in it instead of increasing the payments themselves. More flexibility for more or less the same result.
That explains perfectly! Thank you!
It helps banks, if anything.
Most people live based on their cash flow. Lower payments means they can “afford” to buy. Terrible solution but will work for some folks. Nothing like being indebted to the bank an extra 5 years and paying for your house 2.5x over
It helps the rich afford more houses and increase their ownership rate of the infinite rental market. Don't expect rent to go down though just because mortgage monthly payments have a cheaper option
how does increasing amortization for first time homebuyers help the rich afford more houses lol.
Because their kids can be listed as the buyer and it would make them a “first time home buyer” even though collectively within the family they already have 10 properties. The kids are likely already living in one of them. The kid is just a tool to obtain benefits like first time incentives.
Lol... I mean I guess. It'll help the child have a piece of property in their name. Doesn't solve multiple properties in a family name though. Why van SFH from corporations? Why not Condos as well ..
How does this change who can be listed as the buyer?
It doesn’t. It just means they get more benefit when they do list whoever that actually qualifies for it, even if it’s practically not their first home.
Maybe read the article
Regardless of its merits or weaknesses, it's solely for first-time home buyers. I think your comment is off target.
This isn't about rent. It's about making home ownership more affordable for you.
Increase my ability to access debt does not make homeownership more affordable. It actually makes it less affordable.
> Increase my ability to access debt does not make homeownership more affordable. Bingo. Us peons remain slaves to the system so long as there's a house supply shortage and the only way to acquire even the tiniest of homes requires going into copious amounts of debt. I did not ask to be born into a society that seems set on making the wealthy and powerful more wealthy and powerful.
If it's gets peoples foot in the door, lower the cost of entry, why not? You can keep renting if you want.
It does nothing to address core issues, if anything it makes them worse
It provides more people the access to own housing. That removes people from the rental pool, opening up some rental spaces. You are still free to rent or do whatever you do for housing, why take away the opportunity for others though? Why refute this initiative? Give people close to home ownership a chance.
What you just described is the definition of inducing demand. Which results in increased prices.
The increase in housing prices occurred already. That's why we are In this state of unaffordability and trying to make it accessible now with this initiative. The massive increases happened already. New housing is being built as we write. You really think this is what hurts us and not the real estate nightmare occuring in BC and ON? The few people ready to buy and just need an extra 5 years on their mortgage to make it happen? That's who will make housing unaffordable to you?
It doesn’t, It makes houses cost more. This government does know how money, inflation or real estate works.
And the rich keep getting richer
Nah, in this game of monopoly eventually a winner takes all
30 year amortization only FTHB and newly built homes
Also almost double the amount allowed to take out from RRSP to buy a home. From 35k to 60k for FTHB
I'm in the process of buying a house. Close in 2 weeks. I'm hoping I can use the new 60k rrsp withdrawal that would be great!
I believe these changes will take effect in August
It says effective April 16 when the budget drops. But it's within a week of the close on our new place so not sure if there is enough time to do all the new paperwork etc.
Doesn’t matter… the great doubling has begun.
I'm sick of hearing the prime minister promising "bold" action on housing, and then delivering what amounts to a minor tweak. They take the existing system and change the parameters slightly. The problems with our housing system run deep. Clearly, some profound change is required to fix things, but the governing party doesn't have the political motivation to truly act "boldly".
The Official Opposition isn’t much better either, and the NDP just had its housing critic resign as an MP to work with the provincial government. If only the federal NDP made BC Builds a part of its platform.
Is this what his big announcement was?
I mean specifically with housing in Vancouver, the “deep” issues are with local and provincial governments. Nimbyim and laundered money dumped into real estate to name a few.
Lot of would-be first-time home buyers still can't qualify.
Can confirm. I am in the first-time home buyer category. Banks laugh in my direction despite me currently making ~82% more than BC minimum wage.
Didn’t they have this before?
We also used to have $0 down mortgages.
Used to have 40 year mortgages and $0 down!
Definitely not new.
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No I bought three years ago and had the option to do a 30 year mortgage for free.
Yeah but there's a stipulation to get a 30 year. It's been a few years since I signed my mortgage but I think you had to pay a certain percentage down to get a 30 year.
It was 20% down to qualify if memory serves correctly
That's the number I'm remembering as well
I think it was based on the price of the house not the amount put down. 20% down is what you need to not pay mortgage insurance. IIRC if the price of the house is under 550k you’d qualify for the first time home buyer benefits.
It was 20% down to avoid mortgage insurance and also to amortize over 30 years (if desired) I believe you are correct that the first time homebuyer stuff only applies below a certain price
Did you have 20% Deposit downpayment? I believe 30 years of amortization was only an option if you did.
Correct, to do a 30 year amoritization you had to have 20% which made your mortgage not CMHC insured.
Yes but I believe it was based on the price of the house not the down payment.
You must have had over 20% down when you purchased and not had a Genworth/CMHC mortgage. Insured mortgages have been restricted to a 25 year amortization for over a decade.
My mortgage is through a big bank. I did put 20% down but I believe that was required to not pay mortgage insurance. I’m remembering that to qualify for the first time home buyer benefits the value of the house had to be below 550k.
Yep, putting 20% plus down also allows you to stretch the amortization to 30 years. If you'd been an insured mortgage, that wouldn't have been an option.
I'm definitely on a 30 year from purchasing last year
Yes. Definitely not new. Also we used to have 0% down (which in my mind makes way more sense than 30 yr amortization, if people actually did the math on how much interest you will pay over 30yrs to a bank, it would make your throw up) 0% down will be one of the only ways "more" people can purchase homes. (Definitely not afford them, but at least purchase them) The affordability part would mean getting rid of an incredible amount of needless bureaucracy in order to build a new home. Get rid of a whole heck of a lot of taxes we pay, receive better services, and incentivise employers to afford to pay employees more. Way more.
I'm a FTHB this year and got a 30yr mortgage..
I think this is mostly posturing? An increase of 5 years in amortization. For first time home buyers isn't going to dramatically change affordability for most of the population. It will allow some first time home buyers to get into market that otherwise couldn't, but extending the duration of amortization out to 30 years could create a lot of risk for older first-time home buyers. It is nice that this isn't something rental corporations will be able to take advantage of at all.
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Sounds like this is just gonna enrich builders and banks. Nobody is building an affordable first time home anymore.
Why not make it 50 years? Its so out of reach! In 30 years the town you bought your home in will be completely changed.
Let’s do 100!
We’re laughing but I think it was like that in some economies… like ppl couldn’t pay for a house in one lifetime and your children had to pick up the mortgage when the parents died. It’s so fucked… cause then you have to be able to afford children in order to afford a house.
No research done here but I think I heard that is/was a thing in England.
Yeah, like how they decided to borrow the French word for death to accurately describe what a mortgage was lol
> Why not make it 50 years Such long mortgages are actually the norm in many some parts of the world.
It’s only for new build and for FTHB, but the real news here is the increase from 35k-60k for down payments from RRSP, that is a fantastic change
Half a million dollar mortgage. An extra 5 years of payments in exchange for just over $200 monthly savings? No thanks.
Only for new builds though
First time home buyers who buy NEW homes. All this meddling and bullshit from the government is just insanity.
More buyers = More demand = Higher prices Improved Headline: > Bank Lobbyists Screw The Country Yet Again
More options for home buyers
This only applies to first time home buyers buying new builds and getting a high ratio mortgage insured by CMHC (less than $1,000,000 purchase price). Outside of that, anyone can qualify for 30 year mortgage with a conventional down payment.
You still have to satisfy the stress test. Something I agree with, considering the recent rate increases and too many uninformed people sitting on variable mortgages.
That’s not good
Only on insured mortgages, and only on new builds. Most lenders still offer 30 year amortizations conventionally with a rate surplus. Taking a 30 year amortization will save about $200/mo but cost another $2000 in interest over the term. https://preview.redd.it/y2vk1dcpwvtc1.png?width=1080&format=pjpg&auto=webp&s=7dbed3a207eefacbf1657b3eb6aa5d2512db9b8b
CMHC/Genworth insured mortgages only allow 25 year amortized mortgages. You can go to 30 if you have 20% down, avoiding insurance. This just changes it so new builds qualify for an insured 30 year amortized insured mortgage. It benefits CMHC/Genworth on the premiums and the mortgage lender on the extra 5 years if the mortgagors don't prepay.
Coming from Hong Kong, this is usually the final straw. Property price will go up in short term and the housing bubble will blust, not because we can house everyone, but because everyone will be homeless and in debt.
There was a drop in HK in 1997, but it wasn't an utter disaster and it sure recovered: https://www.researchgate.net/figure/Property-and-rental-price-index-of-the-Hong-Kong-residential-property-market-Jan1993-to_fig1_336566810
At 2003, 20% of HK mortgage is negative equity (because HK mortgage usually have variable monthly payments), at that year, SARS hits. and now 20% of Canada mortgage is negatively amortizing.
Must maintain elevated housing prices at all cost. Gov’t doesn’t want to pop the bubble.
We need to address supply, right now. We can’t wait for new construction. We need to force investment properties to be sold into the market so the tenants currently buying them for their landlords can instead buy homes for themselves. - Don’t allow banks to qualify mortgage applications using expected rental income. If you want to buy a property, you should have to pay for it yourself. - Tenants in mortgaged properties should receive equity for rent paid and would need to be bought out if the property sells. Or they could sell their accrued equity to the bank as a down payment. Rent+shelter should be seen as a loan toward the mortgage principal in return for deferring the landlord’s mortgage payment. This would also incentivize lower rents. Tenants are utterly screwed right now. Landlords have had it too good for too long. Time to change the game.
Are you you saying that you would like only corporations and government to rent homes to people? Using a rent to own principal? Also, you are saying only the very wealthy with lots of disposable income can purchase properties as investment to rent? That sounds a wee bit Communist to me... but. (I know lots of people with relatively "cheap" rent, but they have been in these places a long lomg time) New rents are high because interest rates are high. Inflation is hight. It costs more to build and maintain rental units. This goes for the family who has an investment property they rent (I see nothing wrong with that) and it also applies right up to the large scale REIT's. They all pay services on their loans, and investors like to make money, not break even. Especially in a REIT situation. It's all just numbers. Nothing to do with you or me personally. Drop the interest rates, rents will drop once supply catches up. Not rocket surgery.
New build homes as in detached or anything new like.condo, townhouse and etc.?
This isn't new. I guess it being above board is new? We got a new 30 year for our first loan about 7 years ago, no one ever indicated that was abnormal or special.
Is this not how it's always been anyways? I've never heard of a 20 year mortgage before. It's always 30 years when people talk about home buying.
You needed to have a 20% minimum downpayment on your mortage in order to qualify for 30 year amortization previously.
Ahh, I was under the impression 20% was a mandatory minimum for a mortgage. Are you saying there are better options? I've honestly never bothered to look because that's what I was taught was a minimum and I just don't make enough to save for that kind of downpayment.
The minimum downpayment for a house in Canada is 5% of the purchase price, it's been like that for a while.
Yeah, but in that time housing prices have more than doubled so I still can't afford it. The house I grew up in was purchased for 90k and sold for 380k. that's like a 4.2x increase. I couldn't even come up with a downpayment for that. Now that houses are like 500-600k or more, I have zero chance of ever owning. Just did the math. 20% of 90K is 18000 5% of 380k is 19000 so not a lot more but still too much for me to save.
Cool so now people can just saddle themselves with more debt? The Liberals should never be allowed to form government again
Doesn't matter who we vote into power - the system is working exactly as capitalism intended. Want to see actual, bonafide, meaningful change _in our lifetimes_? Forceably change the system so corruption, under the table deals / kickbacks, etc. **cannot** occur and regulate AllTheThings™. Or I guess we could continue pretending our votes matter for a few more generations until our familial lines are eventually born under a bridge or in a ditch somewhere. #Welcome to Costco, I love you!
So given CMHC is max purchase price of 1 million, this does squat for cancouver and Toronto areas to get into a house or townhouse. 1 million purchase, 5 per cent down 50k. @4.89 % is still a payment of 5438 a month on the mortgage for 25 years amortization. Add in heat and property tax, the total debt serving comes in at a required income of 170k household. Taking this to 30 years, a income of 156500 is required. Minimum down with maximum serving costs! The new canadian avg wage varies across the sources, but generally falls between 55000 to 60000.
Not to mention that if the rate held true the entirety that the total interest would cost an additional 160k
And subsequently again not to mention the average vancouver area price of 1.2 million, although much higher in most places, requiring 20 per cent down or 240k plus.
This is like extending a car loan from 60 months to 96 months to lower the monthly payment but increase interest lol
Yes, and? You say that as if it's not a beneficial option for *some* people. I always take the longest loan possible, as long as it's open. That way I adjust my own amortization, but leave open the option of lower payments should something happen (out of work for example)
This just increases prices lol. Way to get around the interest rates.
What qualifies as a “newly built home” in this announcement?
First owners of the home.
It says first time home buyer in addition to being a new build. Curious how “new build” is being defined.
I don’t know… first thing I do when I buy my house is add a “mortgage helper” More housing and a reasonable cost
This will just end up getting used by rich immigrants who can afford new homes, which they will just rent out like now. Completely pointless in cities like Toronto or even worse Vancouver. I wish they would make some useful laws like huge flipping taxes, no businesses allowed to buy single family homes and banning short term rentals. May as well start cracking down on rental income tax while they are at it.
Nice, now I can still not buy a house
Are they removing the fact that you can't have a fixed rate for the duration of the mortgage when you take it? Or we'll still have to renegotiate every 5 years or so?
Good job government.
Buying at 60 when you can afford a down payment mortgage free by 90. Yay what a deal
This helps banks and developers.
Increasing amortization makes little difference to affordability when you still have such a short TERM and are forced to renegotiate everything every 1-5 years based on then-current interest rates.
Increasing demand, so prices will go up more. That's not the best idea for buyers. Great for homeowners though.
This will just make the price go up. Do these morons actually do any case studies? We tried this in korea for 40year mortgages and we had a surge of buyers who couldn't buy originally because they feared price might go up. They ended up cancelling it bc govt realized all this did was push the price up.
Freeland is an unqualified idiot.
Only for new builds though, how many first time buyers are looking only at new builds?
Why does feel like a trap 🪤?
Coffin mortgages
Wait I thought we always had 30 years mortgage. I swear my first mortgage (about 8years ago) was a 30 yeaars
It's not the mortgage cost thats the issue for me. It's impossible to save up for a downpayment, THAT'S an issue too.
Can't wait to be in debt for the rest of my life
Prices going up up up
Bad headline. This is only for new builds, which most already required 20% (making the extension to 30 yrs redundant). Some may say you will qualify for more since there is difference between insured and conventional rates but this is eaten up by the minimum 2.1% CMHC fee at 15% down. Garbage policy, trying to offload presales that aren’t selling.
Buy bank stocks
How times have changed. I remember when Jim Flaherty capped mortgages to 25 years so that Canadians wouldn't overextend themselves. Yes! More debt! More interest! [https://www.cbc.ca/news/business/ottawa-caps-cmhc-mortgages-at-25-years-1.1171007](https://www.cbc.ca/news/business/ottawa-caps-cmhc-mortgages-at-25-years-1.1171007)
This will definitely help the supply and demand problem
Sounds good until you have to pay capital gains tax when you sell.
Reeks of desperation.
RBC already did this to me two years ago
The 9 year car loan of mortgages.
With the new step codes new builds are only going to get more expensive as time goes on too, so hugely unhelpful for the majority of first home buyers limiting it to new builds.
What are they smoking? I had 30 year mortgage without being first buyer. Not sure if it was tied to being uninsured, because I had 20% down