Breaking Down the Latest Mortgage Reforms: Key Insights You Shouldn't Miss

As announced on September 16, 2024, the federal government is expanding eligibility for 30 year amortizations for insured mortgages to all first-time homebuyers and all purchasers of new builds, and increasing the $1 million price cap for insured mortgages to $1.5 million, effective December 15, 2024. Let’s break these down to understand what they mean.

Expanding 30-Year Mortgage Amortizations for First-Time Homebuyers and New Builds

To provide more flexibility for homebuyers, 30-year mortgage amortizations will be expanded to include all first-time homebuyers and those purchasing newly built homes. This initiative specifically applies to borrowers who require high loan-to-value mortgage insurance and must meet the following conditions:

• The total loan-to-value ratio must be 80% or higher; and
• The borrower must either be:
• 1. A first-time homebuyer, or
  2. Purchasing a newly constructed home.

Who Qualifies as a First-Time Homebuyer?

To qualify as a first-time homebuyer, the borrower must meet one of the following criteria:

• The borrower has never previously purchased a home.
• In the last four years, the borrower has not occupied a home as their principal residence that they, or their spouse/common-law partner, owned.
• The borrower has recently undergone a breakdown of a marriage or common-law relationship. This provision aligns with the Canada Revenue Agency's Home Buyers’ Plan rules.

What Qualifies as a Newly Constructed Home?

A home is considered newly constructed if it has not been previously occupied for residential purposes. This definition includes newly built condominiums, even if there has been an interim occupancy period prior to closing.

Increasing the Insured Mortgage Price Cap to $1.5 Million

The cap on property values eligible for insured mortgages will be increased from $1 million to $1.5 million, providing buyers in higher-priced markets greater access to insurance-backed mortgages. This measure applies to borrowers needing high loan-to-value mortgage insurance and requires that:

• The total loan-to-value ratio is 80% or higher;
• The value of the property securing the loan is less than $1.5 million; and
• The down payment must meet the following requirements:
• • 5% on the portion of the purchase price up to $500,000.
  • 10% on the portion between $500,000 and $1.5 million.

Important Dates and Additional Requirements

• Effective Date: These measures will apply to mortgage insurance applications submitted to lenders on or after December 15, 2024.
• Occupancy Requirement: These provisions only apply to high loan-to-value mortgages on homes occupied by the borrower or a close relative.
• Other Criteria: All existing eligibility criteria for government-backed mortgage insurance will remain in effect.

This expansion of eligibility and the increased price cap aim to make homeownership more attainable for first-time buyers and those investing in newly built properties, especially in competitive markets across Canada.

As always, reach out if you have any questions.