In the realm of Canadian mortgages, significant shifts are underway as federal initiatives aim to reshape the landscape for both prospective homebuyers and current homeowners.
Let’s delve into the key highlights from the 2024 Federal Budget and explore how they might influence your mortgage strategies.
The 2024 Federal Budget, unveiled on April 16, marks a decisive step towards addressing housing challenges, with a range of measures aimed at enhancing affordability and market stability. While some provisions are already in effect, others await further elaboration in the upcoming 2024 Fall Economic Statement.
Here’s a concise overview of the budget’s housing provisions
Tackling the Housing Crunch
- A comprehensive strategy aims to unlock 3.9 million new homes by 2031, with the goal of stabilizing prices and expanding homeownership opportunities. Key components include:
- Building homes on public and leased land, including properties owned by Canada Post.
- Repurposing underutilized federal offices into residential spaces.
- Introducing taxes on vacant land to incentivize construction.
- Promoting the construction of apartments to alleviate rental demand and housing pressure.
- Expanding modular housing and establishing a housing design catalogue.
- Streamlining regulatory processes to facilitate the construction of nearly 800,000 homes and associated infrastructure.
- Addressing Indigenous housing needs and aligning immigration policies with housing capacity.
Support for First-Time Homebuyers
Effective August 1, 2024, first-time homebuyers purchasing newly built homes with less than 20% down payment can extend their mortgage amortization from 25 to 30 years, reducing monthly payments and enhancing affordability ratios. Additionally, revisions to the Home Buyers’ Plan allow first-timers to withdraw up to $60,000 from their RRSPs and extend repayment timelines.
Enhanced Mortgage Relief
Lenders are urged to offer extended 35-year amortizations for mortgage holders facing financial hardship, with comprehensive documentation required to assess eligibility. Moreover, lenders must engage clients approaching mortgage renewals at least one year in advance to discuss options and affordability considerations.
The Canadian Mortgage Charter
Introduced in Fall 2023, the Canadian Mortgage Charter outlines lenders’ responsibilities in supporting struggling mortgage holders amidst rising interest rates. While some provisions are discretionary, borrowers are encouraged to consult with knowledgeable brokers to explore available assistance.
Mitigating Short-Term Rentals and Home Flipping
Measures are in place to discourage speculative practices, including denying tax deductions for non-compliant short-term rental income and launching enforcement efforts to convert such properties into primary residences. Additionally, taxation on profits from home flipping is enforced to deter speculative investment.
Expansion of Halal Mortgages
Efforts are underway to broaden access to Sharia-compliant mortgage products, catering to the needs of Muslim Canadians and other diverse communities seeking homeownership opportunities.
Promoting Energy Efficiency
Significant funding is allocated to programs promoting energy-efficient homes, including grants and loans to incentivize green renovations and transitions from oil to heat pumps, reducing energy costs for homeowners.
Combating Fraud through Income Verification
Consultations with industry stakeholders aim to implement a system for direct income verification through the Canada Revenue Agency, deterring fraudulent reporting and enhancing borrower and lender confidence.
Encouraging Secondary Suites
A new loan program enables homeowners to access low-interest loans for the construction of secondary suites, aligning with municipal zoning reforms to increase housing supply and accommodate diverse housing needs.
Protecting Homes in Flood Zones
A dedicated arm of the CMHC will oversee the implementation of a national flood reinsurance program by 2025, safeguarding home values in high-risk flood areas where private insurance options are limited.
Regulating Corporate Investment in Single-Family Homes
Policies are proposed to limit corporate acquisitions of single-family homes, ensuring fair competition, and preserving neighborhood dynamics.
Capital Gains Taxation on Secondary Properties
Effective June 25, 2024, an increased capital gains inclusion rate applies to annual profits exceeding $250,000 from secondary properties, impacting sales of vacation homes and investment properties.
In Conclusion
As these policy initiatives unfold, our role as your trusted mortgage brokerage becomes increasingly vital in navigating the evolving landscape.
We remain committed to providing informed guidance tailored to your unique circumstances, ensuring you capitalize on available opportunities while safeguarding your financial interests.
Whether you’re seeking clarity on government programs or exploring mortgage options, we’re here to help you secure the best outcome!
