Changes Coming to Canadian Mortgages for First-Time Homebuyer and New Build Mortgages in 2024

If you’re a first-time homebuyer (FTHB) or considering the purchase of a new build, significant changes to the mortgage landscape are on the horizon, and they could affect your buying power. Starting in December 2024, new rules will make it easier to get into the housing market, with expanded options for longer amortizations and higher price caps for insured mortgages. Here’s everything you need to know about these upcoming changes and how they might influence your decision to buy or sell in the coming months.

What’s New in Changes Coming to Canadian Mortgages?

30-Year Amortizations for First-Time Buyers and New Builds

One of the most significant changes coming in December 2024 is the option for a 30-year amortization on insured mortgages. This is particularly important for first-time homebuyers, as it allows for a longer repayment period, potentially lowering your monthly payments and increasing the amount you can qualify for when purchasing a home.

This new rule applies to insured mortgages, which are often used by buyers who put down less than 20% of the purchase price. Previously, insured mortgages were capped at 25-year amortizations. By extending the amortization to 30 years, first-time buyers will now have more flexibility to manage their monthly payments, making homeownership more accessible.

For new builds, this change technically came into effect on August 1, 2024, and is available to all buyers, not just first-time homebuyers. This is great news for those looking to purchase newly constructed homes, as the longer amortization period allows for more purchasing power and easier monthly budgeting.

Increased Price Cap for Insured Mortgages

Another big change coming in December 2024 is the increase in the price cap for insured mortgages. Previously, buyers could only get mortgage insurance on homes valued at up to $999,999. However, starting in December, this cap will be raised to $1.5 million. This will allow buyers to qualify for insured mortgages on more expensive homes, particularly in hot markets like Vancouver, Toronto, and other high-demand areas where average home prices often exceed the previous cap.

This increase is a game-changer for buyers who are struggling to enter the market due to rising home prices. With the new cap in place, buyers will be able to access more affordable mortgage terms, even for homes priced just under $1.5 million.

The Fine Print

The changes to mortgage rules come with a few important details to keep in mind:

• Down Payment Requirements: The down payment structure remains the same under these new rules. For homes priced up to $500,000, the minimum down payment is still 5%. For homes priced between $500,000 and $1.5 million, the down payment is 10% on the portion over $500,000.
  • For example, under the previous rules, buying a $1.5 million home would have required a minimum down payment of $300,000. With these new rules, first-time homebuyers can now get into that same home with just $125,000 down, providing significant savings.

This reduction in required upfront costs could relieve some of the financial pressure on buyers, including those relying on assistance from family members—often dubbed “The Bank of Mom and Dad.”

Effective Date

These changes apply to mortgage insurance applications submitted on or after December 15, 2024. It’s important to note the word “submitted.” If you want to take advantage of the new 30-year amortization or the increased price cap, your offer must be timed just right. Buyers planning to make a move should carefully consider their timing to maximize the benefits of these new rules.

What Will This Mean for the Housing Market?

The Canadian housing market is already experiencing a mix of high demand and fluctuating interest rates, and these new rules are expected to fuel further changes. We are currently seeing lenders competing for new business in what many are calling a “rate war,” as mortgage rates have been dropping after rising sharply in 2023.

With first-time homebuyers qualifying for longer amortizations and a higher price cap, demand is expected to rise significantly, especially after December 15. Historically, an increase in demand typically leads to higher home prices. In particular, homes priced between $1 million and $1.5 million, which were previously out of reach for many first-time buyers, could see a surge in interest. As a result, competition for these homes may increase, driving prices higher.

Should You Buy or Sell Now?

While no one can predict the future of the housing market with certainty, there are a few considerations to keep in mind as you decide whether to buy or sell before or after the changes take effect.

• Buy Now: If you’re in the market to buy, purchasing a home before December could allow you to avoid the increased competition that is likely to come with the new 30-year amortization rules. With fewer buyers qualifying for higher-priced homes right now, you might be able to find a good deal before demand spikes.
• Sell Later: If you’re thinking about selling, particularly if your home is priced between $1 million and $1.5 million, it might be worth waiting until after December 15 to list. With more buyers qualifying for higher-priced homes under the new rules, you could see increased interest in your property, potentially leading to higher offers.

Stay Tuned for More Details

As lenders and insurers prepare to implement these new rules, we can expect more information on how they will handle down payments, mortgage rates, and qualification requirements. I’ll be sure to keep you updated on any further developments that could impact your buying or selling decisions.

In the meantime, if you’re considering buying or selling and want to discuss how these changes might affect your plans, feel free to reach out. This could be a great opportunity to make your move in the market.