Canada announces changes to mortgages in effort to help first-time homebuyers

New changes are coming to how mortgages work in Canada that are designed to help first-time homebuyers get into the housing market.

Finance Minister Chrystia Freeland made the pre-budget announcement Thursday, saying the government will allow first-time homebuyers to pay off their mortgage in 30 years instead of 25 years, which is what the longest repayment period sits at now.

This would apply to homebuyers buying newly built homes or condos.

The announcement says this amortization extension will allow more young Canadians to afford a monthly mortgage payment and encourage new supply.

When you look at the breakdown, it would mean a longer pay period but small payments each time.

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For example, if you had a $100,000 mortgage with a five-year fixed rate of 5.6 per cent, your monthly payments over 25 years would be about $616.

Over 30 years, your monthly payment would drop to $570, a difference of about $46.

This comes at a time when many Canadians say getting into the housing market is hard enough.

A new CIBC survey says three in four Canadians who don’t already own a home feel that homeownership is out of reach.

But many still have a goal of owning a home one day.

To help with a down payment, Freeland also announced that the government will nearly double the amount of money a first-time home buyer can withdraw from an RRSP, up to $60,000.

Friday morning, Prime Minister Justin Trudeau is also making a housing announcement ahead of the federal budget being released next week.