NEW MORTGAGE RULE CHANGES FOR CANADA IN 2024
Curious about the new mortgage rule changes for Canada in 2024? The Canadian mortgage landscape is set to have changes that aim to make homeownership more accessible. Starting December 15, 2024, these adjustments will affect insured mortgages. This provides expanded options for buyers with lower down payments. Here’s a look at the upcoming changes and what they could mean for prospective homeowners.
INSURED MORTGAGES IN CANADA
In Canada, an insured mortgage requires mortgage insurance when a buyer’s down payment is less than 20% of the home’s purchase price. This insurance protects the lender in case the borrower defaults on the mortgage. This coverage is provided by Canada Mortgage and Housing Corporation (CMHC) and private insurers such as Sagen and Canada Guaranty.
Insured mortgages generally allow buyers to finance up to 95% of the home’s purchase price (slightly less for properties over $500,000). Furthermore, these often come with favourable interest rates.
1. INCREASED PURCHASE PRICE CAP FOR INSURED MORTGAGES
From December 15, 2024, the maximum purchase price to qualify for an insured mortgage will increase from $1 million to $1.5 million. This enables buyers to secure insured mortgages with lower down payments for homes in this price range. Previously, this was restricted to uninsured mortgages requiring at least 20% down.
More Canadians with less than a 20% down payment can qualify for mortgages with this higher price cap. Additionally, this will offer greater flexibility for buyers in pricier markets or those looking to set aside funds for other uses.
Down Payment Example: $1,250,000 Purchase Price
Before December 15: Minimum down payment = $250,000 (20% + down payment required)
After December 15: Minimum down payment = $100,000 (under new rules)
The minimum down payment will be calculated as 5% on the first $500,000 and 10% on the remaining amount up to $1,499,999.99. Purchases at or above $1.5 million will still require a minimum down payment of 20%.
2. EXTENDED AMORTIZATION PERIOD FOR FIRST-TIME BUYERS
First-time homebuyers with down payments of less than 20% will be eligible for an amortization period of up to 30 years. This is an increase from the previous 25-year limit. This extension can reduce monthly payments, making homeownership more affordable and accessible for many.
Amortization Example
Home Price: $1,250,000
Down Payment: $100,000 (new rules)
Base Mortgage: $1,150,000
Mortgage with Insurance: $1,196,000
Monthly Payments
25-Year Amortization: $6,285/month
30-Year Amortization: $5,680/month
(Sample Interest Rate: 3.99%)
If you qualify for the First-Time Home Buyer’s Plan (HBP) requirements, you will likely also meet the first-time buyer criteria for extended amortization.
3. 30-YEAR AMORTIZATIONS FOR NEW CONSTRUCTION HOMES
This extension isn’t just for first-time buyers. Insured buyers purchasing newly built homes (whether condo or freehold) with down payments below 20% can now choose a 30-year amortization. This change aims to increase housing accessibility while promoting growth in the new-build sector.
IMPORTANT CONSIDERATIONS FOR BUYERS
If you’ve been approved for a mortgage before December 15, 2024, your lender may need to resubmit your application to be considered under the new mortgage rule changes. If there’s sufficient time between December 15 and your closing date, you might qualify under the new rules. Contact your mortgage advisor for guidance on your application.
For recent publications and further details on these changes, refer to the links below:
Curious about how these new mortgage changes could bring your dream home closer? Don’t hesitate to reach out. We’re here to help you make the most of these updates for a smooth, confident home-buying journey!
Source: Outline.ca