5 Things to Know About the New Federal Mortgage Rules in Canada

If you’re a first-time home buyer in Canada, you may be in luck! The federal government recently introduced new mortgage rules aimed at making your purchase more affordable. One of the main changes is the new option for a 30-year mortgage. To fully understand how these changes might impact you, it’s best to contact one of our expert mortgage brokers. In the meantime, here are five key things you need to know about these new rules, which come into effect on December 15, 2024.

1. Higher Price Limit for Insured Mortgages

The government is raising the price limit for insured mortgages from $1 million to $1.5 million. This means that buyers looking to purchase homes up to $1.5 million can now qualify for mortgage insurance if their loan-to-value (LTV) ratio is at least 80%.

This change is especially helpful for those buying homes in areas where prices are typically higher. Now, for a $1.5-million home, you would only need a $125,000 down payment, compared to the current $300,000 requirement for uninsured mortgages.

2. Same Down Payment Rules

While the price cap for insured mortgages is going up, the down payment structure stays the same:

• 5% down for the first $500,000 of the purchase price.
• 10% down for the portion between $500,000 and $1.5 million.

This makes it easier for buyers to enter the market, even as home prices increase. The new rules allow buyers to pay less upfront when buying homes that would have required larger down payments under previous rules.

3. Longer 30-Year Amortization Periods

Another big change is the introduction of 30-year amortization periods for insured mortgages. First-time homebuyers and those buying newly built homes can now spread their payments over 30 years, as long as their loan-to-value ratio is 80% or more.

• To qualify as a first-time homebuyer:
• You must not have bought a home before.
• You must not have owned or lived in a home in the past four years.
• You must have recently gone through a marriage or common-law relationship breakdown, as recognized by the Canada Revenue Agency.

For newly built homes, they must be brand new and not previously lived in, though new condos with interim occupancy still qualify. This longer payment period means lower monthly payments, making it easier for buyers to handle high interest rates.

4. Changes Apply to High-Ratio Mortgages

These updates will apply to high-ratio mortgages, which are those with a loan-to-value ratio of 80% or higher, on homes that are owner-occupied or lived in by close family members. The government has confirmed that the existing rules for mortgage insurance will stay the same.

Buyers can expect these changes to be available starting December 15, 2024, with lenders and insurers ready to offer mortgages under the new guidelines.

5. Expected Boost in Housing Demand

Experts believe that these new rules will likely increase housing demand. Raising the insured mortgage price cap to $1.5 million will allow more people to buy single-family homes, while offering 30-year amortizations could boost buying power by about 10%, similar to a 0.90% mortgage rate cut.

The government’s new mortgage rules make it easier for Canadians to buy homes, especially in areas with high prices. By raising the price cap for insured mortgages and offering longer repayment periods, these changes help reduce the upfront and monthly costs of buying a home. Buyers, lenders, and insurers should be ready for these changes, which could have a big impact on the housing market. 
It’s always a good idea to talk to a mortgage broker to see how these changes could help you and what your best options are. Contact us today to get started.