The announcement was just a few days ago, and already the questions are pouring in.

To help, today I’m going to walk you through the two key changes coming into effect December 14, 2024: (1) An increased threshold for mortgage insurance; and (2) A longer amortization for first time buyers.

Part 1: Increased Cap for Mortgage Insurance

To begin with, let’s talk mortgage insurance. According to the announcement, “The federal government is raising the price cap for insured mortgages, increasing the limit from $1 million to $1.5 million. This allows buyers within that range to qualify for mortgage insurance.”

So, what does this mean for home buyers?

Until recently, if you had less than a 20% down payment saved, you would have needed to obtain mortgage insurance when buying a house. This is still true.

The part that has changed is the amount you could spend on the house in order to qualify for less than 20% down. Until this announcement, the limit you could spend on a house and still bring less than 20% down payment to the table was $1.0M.

Beginning December 14th of this year, you can now spend up to $1.5M on a home and still qualify for mortgage insurance. This means you can have a much lower down payment than 20% and still be able to buy a home over $1M.

Now of course you don’t need to spend $1.5M, you could for example buy a nice townhouse in Oakville for $1.1M. In this case you would only need a $110,000 down payment, whereas before you would have had to come up with a minimum of 20% down, or 220,000.

It's important to understand that mortgage insurance, like any insurance, costs money. The risk that your bank is taking in allowing you to borrow money on a more expensive house is mitigated by the mortgage insurance, which is usually tacked on to the mortgage principal. This will make your mortgage payments a bit higher, but for many people this is preferable to waiting another year or two to save the extra hundred thousand dollars in down payment.

In short, the idea is to make the dream of home ownership a reality for more people, especially in places like the GTA where let’s face it, it’s pretty common to be looking at houses around the $1M mark.

Part 2: Expanding Eligibility for 30-Year Amortizations

The other important change is the expansion of 30-year amortization periods for insured mortgages. This longer amortization option will now be available to all first-time homebuyers and those purchasing new construction homes.

Remember, if it’s an insured mortgage that means you have less than a 20% down payment

The idea with this change is that longer amortization periods help to ease the burden of today’s high interest rates. Just click below to use my mortgage amortization calculator and you will see a noticeable difference in your monthly mortgage payments when you add in those 5 additional years to a pay it off.

Now, I’m not a mortgage broker or a financial advisor – but buyers should understand that a longer amortization – a longer time to pay off the mortgage – means that you will be paying less towards the principal and more towards the interest in the payments for the first few years of that mortgage.

We recommend that you touch base with your friendly neighbhourhood mortgage broker to discuss your own personal situation. I always encourage my clients to be sure you have all the information and understand the financial implications before going ahead with a home purchase.

As you might imagine, there are lots of complexities built into these changes. It’s important that you get the best possible advice from your mortgage broker because no one likes financial surprises, especially with a purchase as big as a home.

Here's the complete article from the Government of Canada. You will find complete information in the article including who qualfies.

If you find yourself impacted by the new mortgage rules and this opens the door for you, as it’s designed to do, get in touch today so I can set you up on a customized home search and of course answer any question you have.