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Canada's New Updated Mortgage Charter

November 23, 2023 | Posted by: Sonia Leo

The Canadian Mortgage Charter spells out the rights consumers have when they are renegotiating mortgages. It calls on financial institutions to provide better relief measures over the next three years to Canadians buckling under a wave of renewals at much higher rates. The federal government has not budgeted any money for the mortgage charter and it is unclear which banks, if any, have signed on.

Under the new mortgage charter, lenders will be expected to notify mortgage holders four to six months in advance of their renewal date. The charter also emphasizes expectations that lenders should have appropriate mortgage relief policies for at-risk consumers, such as extending amortizations.

Canadians can expect:

  • Allowing temporary extensions of the amortization period for mortgage holders at risk;
  • Waiving fees and costs that would have otherwise been charged for relief measures;
  • Not requiring insured mortgage holders to requalify under the insured minimum qualifying rate when switching lenders at mortgage renewal;
  • Contacting homeowners four to six months in advance of their mortgage renewal to inform them of their renewal options;
  • Giving homeowners at risk the ability to make lump sum payments to avoid negative amortization or sell their principal residence without any prepayment penalties; and,
  • Not charging interest on interest in the event that mortgage relief measures result in a temporary period of negative amortization.

Update on the Tax-Free First Home Savings Account

The federal government introduced the Tax-Free First Home Savings Account in Budget 2022 to help Canadians get on track towards achieving their dreams of homeownership.

The new Tax-Free First Home Savings Account is a registered savings account that allows Canadians to contribute up to $8,000 per year, and up to a lifetime limit of $40,000, towards their first down payment. To help Canadians reach their savings goals, First Home Savings Account contributions are tax deductible on annual income tax returns, like a Registered Retirement Savings Plan (RRSP). And, like a Tax-Free Savings Account (TFSA), withdrawals to purchase a first home-including any investment income on contributions-are non-taxable. Tax-free in; tax-free out.

As of October 31, more than 250,000 Canadians have already opened a Tax-Free First Home Savings Account to save for their first down payment-putting homeownership back within reach across the country and helping them reach their savings goals sooner.

Tax-Free First Home Savings Accounts are currently available at more than 20 financial institutions across the country, and more institutions are continuing their work to launch Tax-Free First Home Savings Accounts soon.

The combined value of federal-provincial tax relief offered by the Tax-Free First Home Savings Account, compared to a taxable account for a couple living in Ontario, earning about $80,000 and each contributing $8,000 annually is detailed in Chart 1.2. Also shown is the maximum downpayment this couple could make with assistance from the Tax-Free First Home Savings Account, Home Buyers' Plan, and the Home Buyers' Tax Credit.

Chart

Housing International Students and Protecting Them From Fraud

International students bring significant social, cultural, and economic benefits to Canada, while enriching the academic experience of domestic students. They also continue to bring long-term benefits to Canada, as many international students transition to permanent residency, and eventually, citizenship.

Canada is a top destination of choice for international students, thanks to our high-quality educational institutions; our welcoming, diverse society; and the opportunities to work or immigrate permanently after graduation. While international students have contributed to life on campuses across the country, some have also experienced challenges.

To help ensure the protection of international students, the federal government is enhancing the Letter of Acceptance verification tool to help crack down on the fraudulent organizations that take advantage of international students wishing to pursue legitimate post-secondary educational opportunities in Canada.

Working with provinces, territories, and post-secondary designated learning institutions, the federal government will also put in place a Recognized Institutions Framework that would reward learning institutions with high standards around selecting, supporting-including by providing access to housing-and retaining international students. Additional details on these measures to help protect international students will be provided in the coming months.

For more details please visit the Government of Canada website here: https://www.budget.canada.ca/fes-eea/2023/report-rapport/chap1-en.html#a1

If you have any mortgage related questions at all please let us know.


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