In the latest episode of our real estate video series, Jay Lewis sat down with Josh Tagg from Mortgages for Less to discuss the reintroduction of the 30-year amortization for first-time homebuyers. This program has raised a lot of questions: Is it a good idea? How can it benefit homebuyers? In this blog post, we’ll break down the key points from their discussion and explore what this means for the market.
The Return of the 30-Year Amortization
Josh Tagg explained that the 30-year amortization isn’t a new concept. It was previously available in Canada, but in 2006, the government introduced a 40-year amortization option to help homebuyers qualify for larger mortgages when interest rates were high. While that longer amortization period is no longer available, the return of the 30-year amortization serves a similar purpose in today’s market where interest rates have risen again.
This program is specifically designed to help first-time homebuyers who are purchasing brand-new homes. The goal of this initiative is twofold:
- To assist first-time homebuyers in affording higher-priced homes.
- To encourage the construction of new homes across Canada.
Who Qualifies for the 30-Year Amortization?
Not everyone can take advantage of this program. As Josh outlined, there are specific criteria that must be met:
- You must be a first-time homebuyer.
- You must have less than a 20% down payment.
- You must be purchasing a brand-new home, typically directly from a builder.
Working with a real estate agent like Jay Lewis can help buyers negotiate better deals with builders, offering an added layer of protection and insight during the home buying process. As Josh pointed out, “It costs you nothing extra to use a real estate agent when you’re working with a builder, but it only provides you that extra benefit.”
How Much More Can You Afford with a 30-Year Amortization?
The major advantage of the 30-year amortization is that it increases the purchasing power of first-time buyers. Josh illustrated this with a typical household income scenario:
- Assume a household income of $100,000 (which may include two incomes and some Canada Child Benefit).
- If you have a 5% down payment and an interest rate of 4.44%, on a 25-year mortgage, you can afford to buy a home worth $430,000.
- However, with a 30-year amortization, that same buyer can now afford a home priced at $460,000 — an extra $30,000 in buying power.
This extra budget can be the difference between purchasing a home with an attached garage versus one without, or moving into a more desirable neighborhood.
Is There a Catch?
Jay asked an important question: “Would buyers be expecting to pay any difference in their interest rate?” Josh reassured viewers that the interest rate, fees, and mortgage structure remain the same whether you choose a 25-year or 30-year amortization. The only difference is that the payments are spread out over a longer period, making the mortgage more affordable in terms of monthly payments.
Why Are New Homes More Expensive?
New homes tend to be priced higher than resale homes. According to Josh, part of this may be because new homes are typically larger, but there are other factors to consider. Jay explained that while buyers often expect new homes to cost more, strategic timing and negotiation can sometimes lead to better deals, resulting in paying less per square foot than a resale home.
“It’s not always more money,” Jay said. “Sometimes it is, of course, depending on the neighborhood or the lot type, but for the most part, with the right strategies, we can make it less than or equal to resale homes.”
Next Steps for Homebuyers
For those interested in taking advantage of the 30-year amortization, the next steps are simple:
- Talk to Josh and his team to get a mortgage pre-approval.
- Work with Jay and his team to navigate the home buying process and negotiate the best deal with builders.
“This program has only been available since August 1st, but we expect it to make a big difference for many first-time buyers, especially younger families,” Josh said.
Conclusion
The return of the 30-year amortization is a significant opportunity for first-time buyers looking to purchase brand-new homes. With the potential to qualify for more home, and the expertise of a real estate agent like Jay to guide you through the negotiation process, now is the time to explore this option.
If you’re in the market for a new home, make sure to reach out to Josh Tagg from Mortgages for Less to get pre-approved and speak with Jay Lewis to find the best deal. This could be the key to unlocking your dream home!
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Tags: #FirstTimeHomeBuyer #30YearAmortization #RealEstateTips #MortgageAdvice #NewConstruction
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