Latest changes to mortgage regulations explained

Mortgage rules eased

A few changes to mortgage regulations were announced this week by federal Finance Minister Chrystia Freeland. Here’s a recap of some of the recent changes.

The Home Buyers’ Plan

Starting April 16, the government will increase in the maximum amount first-time home buyers’ can withdraw from their Registered Retirement Savings Plans (RRSPs) to assist with their down payment. Previously set at $35,000, this limit will be raised to $60,000.

There is also a change that extends the grace period for repaying RRSPs after a withdrawal. From now until the end of 2025, first-time home buyers who use their RRSP funds towards purchasing a home will have five years to start their repayments, rather than the previous two-year requirement. This extension gives new homeowners additional breathing room to stabilize financially after acquiring their property.

Extended amortizations

Freeland, who is also the deputy prime minister, also unveiled modifications to the amortization schedule for mortgage repayments, which are set to take effect on Aug. 1. First-time home buyers opting for insured mortgages on newly-built homes will now have up to 30 years to repay their mortgages. This adjustment aims to make monthly payments more manageable, thereby making homeownership more accessible to younger Canadians, a demographic that often struggles with housing affordability.

Mortgage renewals

In an effort to further support homeowners, the federal government has introduced a mandate under the Canadian Mortgage Charter requiring banks to proactively communicate with homeowners about their mortgage renewal options. Previously, banks were required to contact homeowners four to six months in advance of their mortgage renewal date. Now, lenders must reach out up to 24 months in advance to discuss available options, giving homeowners ample time to make informed decisions regarding their mortgage arrangements.

Mortgage charter updates

Additionally, the mortgage charter has been updated to permanently include provisions for those facing financial difficulties. These measures include:

• Waiving fees and additional costs that would typically be charged for mortgage relief measures.

• Exempting insured mortgage holders from re-qualifying under the stress test when switching lenders at mortgage renewal time.

• Allowing borrowers to make lump sum payments towards their mortgage to avoid negative amortization or to sell their principal residence without facing prepayment penalties.

• Waiving interest on interest for deferred mortgage payments that do not cover the interest charges on the loan.

These enhancements to mortgage and financial regulations represent a proactive approach by the Canadian government to address the needs of first-time home buyers and financially vulnerable borrowers.

The extended amortization periods, increased RRSP withdrawal limits and improved communication and support measures are all designed to ease the burden on new homeowners and provide a clearer path to financial stability and homeownership.

As always, if you have questions about how these changes might affect your home buying journey or need guidance through the mortgage process, feel free to reach out to me at [email protected] or you can book a time for a chat here on my calendar www.calendly.com/april-dunn

It’s a great time for first-time buyers to consider their options, and as your trusted mortgage broker, I’m here to help you every step of the way.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

Website: www.reddoormortgage.com

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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