As a first-time homebuyer you can now stretch your mortgage to 30 years. But is that a good idea?

A home is the biggest purchase you will ever make, but as prices remain high it’s getting tougher for many Canadians to enter the market.
According to a CIBC survey, 76 per cent of Canadians who haven’t bought a house feel that homeownership is out of reach.
The federal government has stepped in to help out with tools like the First Home Savings Account and measures such as extending amortizations for eligible Canadians.
Extending your amortization — the length of the loan — can help you finance a home purchase for less. But experts warn there are risks. 
As of Aug. 1, the federal government began allowing 30-year amortization periods on insured mortgages for first-time homeowners who purchase new builds with less than 20 per cent down. Previously, only homeowners who paid 20 per cent down were eligible to go with a 30-year amortization. 
The main attraction to stretching your amortization is a smaller monthly mortgage payment.
The downside is that it’ll take 30 years to pay off your loan, and you will also pay more in interest over the life of the loan.
For example, a homeowner with an $800,000 mortgage that has a fixed rate of 5.5 per cent would pay nearly $160,000 more in interest over 30 years versus 25 years, according to the Government of Canada’s mortgage calculator. 
Colin White, portfolio manager and CEO of Verecan Capital Management in Halifax, N.S. and Jason Heath, managing director at Objective Financial Partners in Toronto, agree there are risks to opting for a longer amortization, particularly for first-time homeowners.
“It’s dangerous window dressing because it sets an expectation that your first home should be brand new and that if you can’t afford a 25-year amortization, affording it on a 30-year amortization makes it okay,” says White. Most lenders allow borrowers to make lump sum payments so that you can shorten your amortization later. 
Heath says that deciding whether or not to stretch your mortgage will also depend on how close you are to retirement.
“In a lot of cases, it’s nice to be entering retirement, or the next phase of your life, when your debt servicing years are behind you.” He adds that prospective homeowners should look into other savings tools and vehicles, such as the First Home Savings Account, which has the features of an RRSP and TFSA to help you save up to a lifetime maximum of $40,000 towards your first house purchase.
There’s also the Home Buyers’ Plan, a federal program that lets you withdraw up to $60,000 tax-free from your RRSP to buy or build an eligible home.
According to the CRA, you have 15 years to pay back what you owe to your registered account, with repayment starting no later than the second year following your withdrawal. 
Any amount you fail to pay back on time will count as taxable income. 
Consider all options before extending your amortization.
“If you can’t afford a house on a 25-year amortization, extending your amortization to 30 years doesn’t mean you can afford it,” says White. “It puts you in a position where you’re stressed every minute of every day — and the smallest financial incidents become a huge emergency because you’ve got nothing to come and go on.”