Exciting Mortgage Changes Coming
On September 16, 2024 the Government of Canada announced two major changes to the 30-Year amortization insured mortgage and insured mortgage purchase price limit, representing a significant shift for the Canadian housing market. The new reforms are aimed at improving housing affordability and mortgage accessibility, allowing buyers to qualify for a higher purchase price with a lower down payment. These changes come into effect December 15, 2024.
On September 24, 2024 we received clarifying information on the down payment requirements for purchase prices between $1M and $1.5M. There will be no additional changes to down payment and it will remain as 5% on the first $500,000 and 10% on any amount over $500,000 up to $1,499,999 and 20% on amounts over $1,500,000.
The chart below outlines the current rules and the proposed rule changes. You can see the increased purchase price extended the amortization from 25 years to 30 years. Also the minimum down payment for mortgages under $1.5M is much less in addition to the interest rate for mortgages between $1M and $1.5M.
Here is a summary of the changes and the rules:
1. 30-Year Mortgage Amortization for First-Time Homebuyers and New Builds
If you're a first-time homebuyer or purchasing a newly constructed home, you might now qualify for a 30-year mortgage amortization. This can make your monthly payments more manageable by spreading them over a longer period.
To be eligible, the following conditions must be met:
Insured Mortgage: Your loan-to-value (LTV) ratio must be 80% or more, meaning your down payment is less than 20% of the home’s value.
First-Time Homebuyer or New Build: You must either be purchasing your first home or buying a newly constructed property.
Who Qualifies as a First-Time Homebuyer?
You’re considered a first-time homebuyer if you meet any of these criteria:
You have never purchased a home before.
You haven’t lived in a home you or your spouse owned in the past 4 years.
You recently went through a marriage or common-law partnership breakdown, similar to the rules for the Home Buyers’ Plan under the Canada Revenue Agency.
What’s Considered a “Newly Constructed” Home?
A newly constructed home is defined as one that has never been lived in for residential purposes. This applies to all types of homes, including condos, even if there was a interim occupancy period.
2. Higher Purchase Price to $1.5 Million for Insured Mortgages
Another change is the increase in the price cap for insured mortgages from $1 million to less than $1.5 million. This is great news if you're looking at higher-value properties but don’t have 20% down payment.
To qualify, you’ll need to meet these criteria:
Insured Mortgage: The LTV ratio must be 80% or higher.
Home Price: The value of the home must be below $1.5 million.
Down Payment Requirements:
5% on the first $500,000 of the purchase price.
10% on the portion between $500,000 and $1.5 million.
When Do These Changes Take Effect?
These measures will be available for mortgage applications submitted on or after December 15, 2024. They apply only to mortgages for homes that will be occupied by the borrower or a close relative. All other existing mortgage insurance rules remain in place.
This is a great opportunity for first-time homebuyers and those eyeing newly built homes to enter the market with more flexible qualifying terms. If you’ve been thinking about buying a home, these changes could open the door to more possibilities. Keep these updates in mind as you plan your home-buying journey!
Have questions about how these changes might affect you? Reach out to us to explore your options.
Read the September 16, 2024 announcement here: Government announces boldest mortgage reforms in decades to unlock homeownership for more Canadians - Canada.ca
Read the September 24, 2024 announcement here: Government announces mortgage reform details to ensure Canadians can access lower monthly mortgage payments by December 15 - Canada.ca
