New Mortgage Rules Make Housing More Affordable

The federal government is introducing changes to its mortgage rules that are sure to help buyers, especially those entering the market for the first time.

Effective Dec. 15, first-time homebuyers will be able to take advantage of a 30-year amortization on both resale and newly constructed homes. Eligibility for the extended amortization period was originally limited to purchases of new builds. That rule came into place Aug. 1. Prior to this, the maximum amortization limit was 25 years.

Stretching the amortization period means lower monthly payments, sometimes by hundreds of dollars, but more time for interest to accrue, increasing the cost of repaying the mortgage over its lifetime.

The second change is to the price cap for insured mortgages, which is being increased to $1.5 million from $1 million for all homebuyers. Right now, anyone purchasing a home for more than $1 million is required to make a 20% down payment to qualify for an insured mortgage. Under the new rule, buyers will have the option to pay a lower down payment, following the existing structure for homes under $1 million, which is 5% of the first $500,000, plus 10% of the remaining cost between $500,000 and $1.5 million. (Anything over $1.5 million will require a 20% down payment). That’s a significant change for homes between $1 million and $1.5 million — one that lowers the price of a minimum down payment by between $125,000 and $175,000.

This move, also effective Dec. 15, will allow more people to qualify for a mortgage, lowering the barrier to entry into the housing market. It’s particularly significant for buyers in major urban markets like Toronto, where home prices often exceed the previous $1-million cap.