New Mortgage Rule Changes

Introduction: The Canadian housing market is evolving, and with it, new mortgage rule changes are coming into effect in December 2024 that could significantly impact your home-buying journey. Whether you’re a first-time buyer or looking to upgrade, these changes could open new doors for you. Explore how the raised insured mortgage limit and expanded 30-year amortizations can benefit you.

Increased Insured Mortgage Limit – What It Means for You

What’s Changing?

• The CMHC-insured mortgage limit is being raised from $1 million to $1.5 million. This allows more Canadians in high-priced markets to qualify for insured mortgages, reducing the down payment required for homes in these areas.

Why Is This Important?

• If you’ve been struggling to save for a large down payment, this new limit can significantly reduce your upfront costs, allowing you to buy a more expensive home with as little as 5% down on the first $500,000 and 10% down on the rest.

Example Scenario:

• Current Rules: If you wanted to buy a $1.5 million home, you’d need at least $300,000 for a down payment.
• New Rules: Under the new limits, you could secure a home up to $1.5 million with a down payment of just $125,000, making it much easier to enter the market.

Key Insight: By expanding this limit, the government is giving more Canadians access to better properties in desirable locations, reducing barriers to homeownership.

30-Year Amortizations – Lower Monthly Payments

What’s Changing?

• All first-time homebuyers will be eligible for a 30-year amortization period on their mortgages, compared to the previous limit of 25 years for insured mortgages. This change will lower your monthly mortgage payments by spreading them over a longer period. Additionally, if you're an existing homeowner purchasing a new build, you can also benefit from the 30-year amortization on that purchase.

Why Is This Important?

• For many first-time buyers, the challenge isn’t just saving for a down payment—it’s making the monthly payments fit within a tight budget. A longer amortization reduces your monthly financial burden, making it easier to manage homeownership costs. This new flexibility also extends to buyers of new builds, making homeownership more affordable across various purchase scenarios.

Example Scenario:

• Before: On a $650,000 home, a 25-year amortization would cost approximately $3,118 per month.
• After: With a 30-year amortization, your payment drops to about $2,818 per month—an average savings of $300/month.

Key Insight: This lower monthly cost allows you to direct those savings toward other financial goals or cover unexpected expenses. The flexibility in budgeting means more Canadians can afford their homes comfortably, whether they are first-time buyers or upgrading to a new build.

Real-World Case Studies

Case Study 1: Jessica, a First-Time Buyer Jessica, a single professional, wanted to buy her first home in Toronto but struggled with affordability. With the new rules, she was able to lower her monthly payments by extending her amortization to 30 years. This allowed her to buy a property in a neighborhood she loved, while saving an additional $250/month compared to her original budget.

Case Study 2: Mark and Emily’s Upgrade Mark and Emily were living in a two-bedroom condo but wanted to upgrade to a detached home as their family grew. The increased mortgage limit allowed them to consider homes that were previously out of reach. They found a $1.5 million home and were able to make a lower down payment thanks to the raised insured limit, allowing them to move forward faster than they had imagined.

Frequently Asked Questions (FAQs)

Q: Who qualifies for the 30-year amortization period?

A: The 30-year amortization is available for all first-time buyers and all buyers of new construction homes. It’s aimed at helping younger buyers manage their monthly payments more effectively.

Q: How does the increased insured mortgage limit work?

A: Starting on December 15, 2024, the insured mortgage limit increases to $1.5 million, which means buyers can secure a CMHC, Sagen or Canada Guaranty-insured mortgage for homes up to that price. The down payment requirements remain 5% on the first $500,000 and 10% on the remaining amount.

Q: Will these changes affect my mortgage qualification?

A: Yes, the raised limit and amortization expansion will likely improve your qualification odds by reducing monthly payments and lowering the down payment requirements for higher-priced homes.