What the Recent Mortgage Loan Rule Changes Mean for You

The home-buying process can be unnerving, especially for first-timers. The legal process, inspections, and negotiations are all new to you. It’s a lot.

When you add rising housing costs to the stress of your first home-buying process, it’s no wonder first-time buyers are seeking some relief—especially for the sizable down payments that you may be facing.

Recent news may be good news for first-time buyers.

Finance Minister Chrystia Freeland recently announced changes to mortgages that she says are focused on helping first-time home buyers face the economic realities of today’s market.

The changes aim to allow more people with less than a 20 percent down payment to qualify for a mortgage. The government is boosting the price cap for insured mortgages to tackle affordability issues, moving the cap to $1.5 million from $1 million. It’s the first time since 2012 that the price cap has risen.

Freeland says these changes will “put the dream of home ownership in reach for more young Canadians,” giving “first-time homebuyers a leg-up.”

In addition to the rising price cap, the Federal government also announced they would expand 30-year mortgage amortization to all insurance mortgages in Canada. Earlier this year, the Canadian government expanded 30-year mortgage amortization, but only to include first-time homebuyers buying new homes. This recent announcement goes beyond those changes to include first-time homebuyers purchasing any type of home.

These newly announced changes will take effect on December 15, 2024.

With the Canada Mortgage and Housing Corporation (CMHC) predicting that “by 2025, [housing] prices could reach the peak level recorded in early 2022 and surpass it in [2026]“, these housing initiatives aimed at down payments should come as welcome news.

What Do These Changes Mean for First-Time Buyers?

Minster Freeland noted that these changes reflect first-time home buyers’ economic reality in the current economy. She said that the price cap and amortization rules need “to keep up with the increase in the size of the Canadian economy.”

These changes are designed to help homebuyers, especially in expensive markets like Toronto and Vancouver, where average home prices often surpass $1 million. Insured mortgages allow you to make a smaller down payment (as little as 5%) on homes valued up to the new cap, providing greater access to housing in high-cost areas​.

Let’s say you’re looking to buy a home for $1.1 million. With the previous price cap of $1 million, your mortgage would not qualify for federal insurance. In this scenario, you must put down at least 20 percent upfront since you are purchasing a home with an uninsured mortgage. That price cap creates a significant obstacle for Canadians purchasing a property worth more than $1 million.

Additionally, a longer amortization period, extending from 25 years to 30, reduces monthly payments, though you may pay more in interest over the life of the loan. There is also potential that the extended amortization period may help you qualify for a larger mortgage than before.

The details about whether a surcharge will apply to insured mortgages over $1 million with less than a 20 percent down payment or if a new tiered down payment system will be introduced remain unclear. These specifics are expected to be clarified in the coming months.

Changes for Renters

On top of the changes for first-time homebuyers, renters are also getting some support. Justice Minister Arif Virani said he would release drafts for a bill of rights for renters and one for homebuyers.

One of the key areas of focus will be to put an end to unfair practices like renovictions. This term refers to a situation where landlords evict tenants, carry out minimal renovations, and then re-rent the property at significantly higher rates.

Changes to Blind Bidding

The government is also seeking to boost transparency in the home-buying process. They intend to make sales price history available on title searches and protect potential buyers from blind bidding.

“What we find is important is ensuring that there’s a level playing field when you’re trying to rent a place to live or to actually get to the stage of buying a home,” Justice Minister Virani said.

Do I Qualify as a First-Time Homebuyer?

To qualify for first-time home-buying incentives, at least one purchaser must meet the following requirements:

• You have never purchased a home before
• You have gone through a breakdown of marriage or common-law partnership (even if the other first-time home buyer requirements are not met)
• In the last four years, you have not occupied a home that either you or your current spouse or common-law partner owned

What Is an Insured Mortgage?

Understanding the concept of an insured mortgage is crucial for a first-time home buyer. Simply put, it’s a mortgage federally mandated to be covered by mortgage default insurance. This requirement arises when your down payment is less than 20% of the home purchase price.

The insurance premium cost is based on your down payment and mortgage size. This cost is typically rolled into your mortgage amount.

A REMAX Agent is Ready to Guide you Through Your First Home Buying Journey

As a first-time homebuyer in Canada, the home-buying process can feel overwhelming. A skilled real estate agent can make a massive difference by guiding you through each stage, from identifying properties that match your needs to negotiating prices and handling the complex paperwork. They can even help you understand recent changes, like the rising price cap and more extended amortization periods.

A REMAX agent will coordinate with lawyers and lenders, review contracts, and ensure that everything runs smoothly for a successful closing. Working with an experienced agent helps you avoid costly mistakes, providing valuable insights into the local market while making the process smoother and less stressful. Having a knowledgeable professional by your side ensures you’re well-supported in making your first home purchase.