October 10, 2024 Update:

Expansion of the insured mortgage threshold for FTHBs and qualification for a 30 year amortization have been dominating the headlines (at least in our world) over the last few weeks. There have been some recent updates that have come out with regards to these policy changes that we would like to clarify. Remember, these new rules take effect December 15th, 2024. 

The new insured mortgage price cap ($1.5 million) applies to two situations:

1. FIRST TIME HOME BUYER

A first time home buyer can be defined as:

• The borrower has never purchased a home before; 
• In the last 4 years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned; or, 
• The borrower recently experienced the breakdown of a marriage or common-law partnership. (the regulations will follow the approach that the Canada Revenue Agency has taken with respect to the Home Buyers’ Plan)

2. NON FIRST TIME HOME BUYER PURCHASING NEW CONSTRUCTION

To be considered a new construction home:

• The new home must not have been previously occupied for residential purposes. (this requirement is not intended to exclude newly constructed condominiums where there has been an interim occupancy period)

INSURED MORTGAGE MINIMUM DOWN PAYMENT CALCULATION

The minimum down payment required for a purchase below $1,500,000 is as follows:

5% on the first $500k

10% on the balance remaining 

Calculation Example:

A client wants to purchase a $1,200,000 house. The minimum down payment would be calculated as:

$500,000 x 5% = $25,000 (5% on the first $500k)

$1,200,000 - $500,000 = $700,000 (remaining balance)

$700,000 x 10% = $70,000 (10% on the balance remaining)

$95,000 = Minimum down payment for a purchase price of $1,200,000

Let's assume the client has a minimum down payment of $95,000 for a purchase of $1,200,000.

$1,200,000 Purchase Price

- $95,000 Minimum Down Payment

+ $44,200 CMHC Insurance 

$1,149,200 Total Mortgage Amount 

At current 5yr fixed insured rates of 4.39%, amortized over 30 years, this would mean monthly payments of $5,721.11/m. Not inclusive of property taxes, hydro, insurance, or utilities. 

For more context, in order to qualify for a mortgage of $1,149,200, assuming minimal debts, clients would need to have a household income of approximately $253,000.

Run your own scenarios with our Purchase Calculator! It will even calculate your CMHC insurance automatically. Make sure you tick the box that says “Enable December 15th Rules” for accurate results. 

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On September 17th, 2024, Canada's inflation figures for August revealed a significant drop to 2.0%, for the first time since 2021. This was well under market expectations and was followed the next day by announcements out of the United States that their FED had cut their key interest rate by 0.50%. These announcements now have economists predicting more Bank of Canada rate cuts (some speculating cuts at every meeting between now and the Summer 2025). This quite significant news on its own. 

MORTGAGE POLICY UPDATES

On September 16, 2024, the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, announced the most substantial update to Canada’s mortgage policy in over a decade. Aiming to make homeownership more accessible for younger Canadians and those in high-cost housing markets, the new reforms include raising the price cap for insured mortgages and broadening eligibility for 30-year amortization. Let’s explore what these two major changes will mean for Canadian homebuyers.

HIGHER INSURED MORTGAGE PRICE CAP

• Current price cap for insured mortgages is $1 million.

• Starting December 15, 2024 the new price cap will be $1.5 million.

A higher insured mortgage price cap means more people should be able to enter higher-priced housing markets with less than 20% down payment. It's important to note that as of publication there has not been much comment from Canadian Mortgage Insurers' on these changes. 

30 YEAR AMORTIZATION ELIGIBILITY EXPANDED

• Currently only FTHB that purchase new construction homes are eligible for 30 year amortizations. 

• Starting December 15, 2024 all FTHB purchases are eligible for 30 year amortizations.

• Starting December 15, 2024 all borrowers purchasing new construction are eligible for 30 year amortizations.

A longer amortization period essentially means lower monthly mortgage payments or increased maximum purchase price, making it easier for more people to qualify

By increasing the insured mortgage cap to $1.5 million and expanding 30-year amortization eligibility, the government seeks to reduce financial barriers and support more Canadians in buying homes. These changes, effective December 15, 2024, build on recent measures to address housing affordability and encourage new construction.

You can find the government's announcement of these changes and additional information HERE.

We will continue to keep our clients and partners informed as more details are brought to light; especially from lenders and mortgage insurers. Keep up to date on our social media where we will continue to post updates. 

If you have questions on this, please feel free to reach out for more information!

OAC, E&O