Big Changes to Mortgage Rules – Here’s How They Can Help You

There are some exciting new mortgage rules coming into play on December 15, 2024, that could make a real difference for homebuyers and those renewing their mortgages. Whether you’re a first-time buyer or someone looking to upgrade, these changes are designed to make homeownership more affordable and flexible. Let’s break them down:

Extended 30-Year Amortization for Insured Mortgages

All first-time homebuyers and those purchasing newly built homes can now access a 30-year amortization period. This is a big deal because it can significantly reduce monthly mortgage payments. Previously, only a 25-year amortization was allowed for insured mortgages, which meant higher payments. With 30 years to pay off the loan, the monthly load becomes lighter, making homeownership more attainable.

Additionally, eligibility for first-time homebuyers includes:

• The borrower has never purchased a home before.
• The borrower has not owned or occupied a principal residence in the last four years.
• The borrower has recently experienced a breakdown in a marriage or common-law relationship, in line with the Canada Revenue Agency’s approach to the Home Buyers’ Plan.

If you’re considering buying a new build, this could help you balance the cost of homeownership with other financial goals by easing that monthly payment burden.

Insured Mortgage Price Cap Increase

Home prices are higher than ever, and the government is recognizing that reality. Starting December 15, 2024, the price cap for insured mortgages will increase from $1 million to $1.5 million. This means that more homebuyers will be able to qualify for an insured mortgage with less than a 20% down payment. For those looking at homes in higher price brackets, this change makes it possible to enter the market without the large upfront cost of a 20% down payment.

The government confirmed that the down payment structure will remain the same:

• 5% for the portion of the purchase price up to $500,000
• 10% for the portion between $500,000 and $1.5 million

This is particularly significant for buyers in major urban markets like Toronto, where home prices often exceed the previous $1 million cap. Starting December 15, you’ll be able to purchase a $1.5-million home with just a $125,000 down payment, a significant reduction from the current $300,000 required for uninsured borrowers.

Flexibility to Switch Lenders Without a Stress Test at Renewal

If your mortgage renewal is coming up, come November 21st, you now have the option to switch lenders without being subject to another mortgage stress test. The change applies to those specifically looking to do a switch. This means any uninsured mortgages that borrowers want to move to a new lender while keeping the same loan amount and amortization schedule, can take advantage of this new rule. This gives you greater flexibility and encourages competition among lenders, which could mean better interest rates and terms. Essentially, you’ll have more power to shop around and find the best deal without worrying about going through the stress test again.

How These Changes Benefit You:

• Lower Monthly Payments: With a 30-year amortization, your monthly mortgage payments can be spread out over a longer period, making it easier to manage your finances.
• Access to More Homes: The increased price cap for insured mortgages allows you to look at homes that might have previously been out of reach without needing a 20% down payment.
• Affordable Down Payments: Buyers in high-priced markets like Toronto can now purchase a $1.5 million home with as little as a $125,000 down payment.
• Better Options at Renewal: With the ability to switch lenders without a stress test, you can shop around for the best mortgage terms without the worry of requalifying.

These changes create new possibilities whether you’re buying a home, renewing a mortgage, or just planning for the future. If you’re curious about how these updates can specifically help you, I’d love to chat more and explore your options. Feel free to reach out with any questions!

Facts from this newsletter are coming from here.