In the latest federal finance news, the Canadian government unveiled two new changes to mortgage rules in response to years of declining first-time home-buyers, thanks to sky-high home prices and higher interest rates.
Effective December 15, 2024, the ability to take on more mortgage is aimed squarely at first-time home buyers and those looking to build a new home:
- An increase in the price cap for insured mortgages from $1M to $1.5M
- First-timers and all new-build buyers can extend an insured mortgage to 30 years (from the standard 25-year amortization)
What does this mean for you?
The $1.5 Million Dollar Cap
By adjusting the insured cap— something that hasn’t be done since 2012— buyers of a $1.5 million dollar home can now secure a mortgage with less than 20% down. The downpayment requirements are as follows:
- 5% on the portion of a purchase price up to $500,000.
- 10% on the portion of a purchase price between $500,000 and under $1.5 million.
These changes will help first-time buyers access their dream home sooner and with less savings.
Pros:
- Buy your preferred home with less than 20% down payment
- Ability to access lower insured rates
- Reach savings for dream home sooner
- Easier for buyers to enter the market which may in turn, entice people to list their homes
Cons:
- More buyers may = increasing home prices
- Higher mortgage increases your debt
- Higher insurance premiums
The 30-Year Amortization Opportunity
Extending the amortization period to 30 years from the standard 25 allows eligible first time buyers to reduce their mortgage payments and enhance their chances of qualifying for a loan– this benefits also applies new-build buyers.
Pros:
- Lowers mortgage payments
- Increases affordability and incentivizes new-builds
Cons:
- More demand may increase prices
- You pay more interest over the lifetime of the mortgage, and less paid on principal
If you are looking for your first home or a new build, start preparing for December now – it’s shaping up to be an exciting season for house hunting the Toronto area!