New Rules for Insured Mortgages coming soon…

Big Changes Coming to Insured Mortgages in Canada

What You Need to Know

On September 24, 2024, the federal government announced significant changes to the rules governing insured mortgages in Canada. These new parameters, set to take effect this December, are designed to make homeownership more accessible for many Canadians. Let's break down what these changes mean for potential homebuyers. 

Two Major Changes

1. Expanded eligibility for 30-year amortizations

2. An increase in the price cap for insured mortgages from $1 million to $1.5 million

Increased Amortizations: 30-Year

The maximum amortization will be increased from 25 years to 30 years

The 30-year amortization option will be available to borrowers who meet these criteria:

- The loan-to-value must be more than 80% (meaning a down payment of less than 20%)

- The borrower must be either:

  - A first-time homebuyer, or

  - Purchasing a newly constructed home 

What Defines a First-Time Homebuyer?

- You've never purchased a home before

- In the last four years, neither you nor your spouse/common-law partner have owned and occupied a home as a principal residence

- You've recently experienced the breakdown of a marriage or common-law partnership

What Counts as a Newly Constructed Home?

A home is considered newly constructed if it hasn't been previously occupied for residential purposes. This includes new condominiums, even if they've had an interim occupancy period.

Increased Price Cap: $1.5 Million

The maximum purchase price for an insured mortgage is increasing from $1 million to $1.5 million

To qualify for this higher cap:

- The loan-to-value ratio must be 80% or more

- The property value must be less than $1.5 million

- The down payment structure is:

  5% on the first $500,000 of the purchase price

  10% on the portion between $500,000 and $1.5 million

Additional Requirements:

For both of these new measures, there are a few more boxes to tick:

- The mortgage insurance application must be submitted on or after December 15, 2024

- The property must be occupied by either the borrower or a close relative

- All existing eligibility criteria for government-guaranteed mortgage insurance must still be met 

What This Means for You

These changes could open up new possibilities for many Canadians, particularly first-time home buyers and those looking to purchase in higher priced markets. The 30-year amortization can help lower monthly payments, while the increased price cap could make it easier to buy in more expensive areas.

However, it's important to remember that a longer amortization period means paying more interest over time, and a higher-priced home comes with increased financial responsibility. As always, it's crucial to carefully consider your financial situation and consult with a mortgage professional before making any decisions.

Stay tuned for more details as we approach the December implementation date. If you have any questions about how these changes might affect your homebuying plans, don't hesitate to reach out for personalized advice.