Federal Government Eases Path to Homeownership with New Mortgage Rules
By Condos HQ - Dec 11,2024
In the past few years, buying a first home has become quite a challenge for Canadians, especially those who reside in metropolitan areas such as the Greater Toronto Area (GTA) and the Greater Vancouver Area (GVA). Worry no more as the federal government has just announced two significant changes to be made to the Canadian mortgage rules that will be coming into effect starting on December 15th. With these changes, rather than bring you more stress, buying your first home will surely feel more like a breeze and will bring more joy to those around you as well!
Higher Mortgage Insurance Cap Benefitting Those in Major Housing Market
Currently, homebuyers looking to purchase their first home can obtain an insured mortgage with less than a 20% down payment for a property costing up to a maximum of $1 million. Starting on December 15th however, the maximum cost of the property will be increased by 50% to a staggering amount of $1.5 million. This will certainly make the whole process more straightforward.
To illustrate this, let’s say that you’ve found the perfect home that costs you a total of $1.3 million. In the old rule, to get a CMHC-insured mortgage, you would need to put a down payment of 20% amounting to $260k. With the new rule, at the bare minimum, you would only need to put a down payment consisting of 5% of the first $500k of the value of your home, and 10% of the remainder. In this case, this would amount to $25k and $80k respectively, totaling for about $105k. Comparing this amount to the initial $260k, you would end up paying 60% less for a down payment.
With this change in effect, homebuyers will have more options to choose from in order to make their dreams a reality. This will especially benefit those in the GTA market and the GVA market which consists of homes in majority priced between $1 million and $1.5 million.
Longer Amortization Period for First-Time Homebuyers = Lower Monthly Payments
Right now, first-time homebuyers looking to acquire an insured mortgage are only able to get the maximum mortgage amortization period of 25 years. Soon, starting December 15th, the maximum mortgage amortization period will increase to 30 years. This decision was made by the government in order to jump-start the currently declining pre-sales numbers. This rule change applies not only to existing homes but also to homes that are newly built, increasing its effectiveness.
We believe that this will lower monthly mortgage payments for homebuyers and also stimulate the sales of homes across the country and drive the economy even further.
In conclusion, the government has created a solution for housing problems that have plagued the country for years. The higher mortgage insurance cap will enable first-time homebuyers to afford more homes with less down payment. The increase in the maximum amortization period will also help lower their monthly payments. Overall, we think that this is just the first step of the journey that the government would have to take in order to further improve the country’s housing market. This concludes our report, and we wish you the best in your home hunt!
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