If you’ve been keeping an eye on the housing market or dreaming of buying a home, some fantastic news just dropped! This week, Canada’s Finance Minister revealed some significant changes to the mortgage landscape that could make homeownership more accessible—and even more affordable—for many Canadians. The updates, set to take effect on December 15, 2024, promise to shake things up in a big way.

In this post, we’ll break down these changes, discuss what they mean for potential buyers and current homeowners, and give you a glimpse of how they could impact the housing market in the near future.

What’s Changing in the Mortgage Landscape?

Starting December 15, 2024, three key updates will take place:

  1. Insured Mortgage Cap Raised to $1.5 Million
  2. 30-Year Amortization Available for First-Time Buyers and New Builds
  3. No More Stress Test at Renewal

Each of these changes brings new opportunities, but let’s dive into what they mean for you specifically.

1. Insured Mortgage Cap Raised to $1.5 Million

For years, the maximum price of a home that could qualify for an insured mortgage in Canada was capped at $1 million. But now, starting in December, this ceiling is being lifted to $1.5 million. This change is especially significant for homebuyers in urban areas, where property prices tend to be higher.

What does this mean for you?
Under the new rules, if you’re eyeing a home worth up to $1.5 million, you could qualify for an insured mortgage with just a minimum 5% down payment on the first $500,000 and 10% on the remaining value. This works out to a down payment of about $125,000 for a $1.5M home—lower than what many buyers currently need to secure financing for homes in this price range.

This shift could open doors for buyers who were previously priced out of competitive markets like Toronto, Vancouver, and other metropolitan areas. If you’ve been feeling the pressure from rising home prices, this new rule might be just what you need to make homeownership a reality.

2. 30-Year Amortization Expanded for First-Time Buyers and New Builds

Amortization periods play a huge role in determining your monthly mortgage payment. Right now, most insured mortgages in Canada come with a 25-year amortization period. But starting in December, 30-year amortizations will be available for first-time homebuyers and for newly constructed homes.

Why does this matter?
Longer amortization periods translate into lower monthly payments, making homeownership more affordable on a month-to-month basis. For example, spreading out your mortgage payments over 30 years instead of 25 can significantly reduce what you owe each month, freeing up your budget for other expenses.

This option could also be a game changer for those interested in purchasing newly built homes. Since many first-time buyers struggle with higher upfront costs, the extra 5 years could provide breathing room as they adjust to their new financial obligations. Plus, it could spur more interest in new developments, boosting housing construction in key markets.

3. No Stress Test at Mortgage Renewal

One of the biggest challenges in Canada’s mortgage process has been the mortgage stress test. Initially designed to ensure borrowers could handle potential interest rate increases, the stress test requires buyers to qualify at a higher rate than the one they’re offered.

But here’s the good news: starting December 2024, you won’t have to pass the stress test when renewing your mortgage with a different lender.

Why is this important?
This means you’ll have more flexibility to shop around for better rates when it’s time to renew your mortgage. Without the stress test hurdle, switching lenders will be a simpler, less stressful process—potentially saving you thousands of dollars over the life of your mortgage.

The stress test, in many cases, has limited homeowners’ ability to find the best mortgage deal available. Removing this requirement will make it easier for homeowners to negotiate better terms with their current lender or explore more competitive options with others.

What Could These Changes Mean for the Market?

The Canadian housing market has been hot for years, with rising prices making it difficult for some buyers to break in. These new mortgage rules—combined with projections for mortgage rates to hover around 3% by the end of 2025—are likely to further ignite competition.

In particular, we can expect a surge in sales volume as more buyers who were previously priced out start entering the market. This increased demand may push prices higher in the most desirable locations, especially as spring 2025 rolls around.

However, with longer amortization periods available and more favorable terms at renewal, some pressure will be eased for both new buyers and existing homeowners. So, while home prices might rise, the new rules offer a more flexible and potentially more affordable pathway to homeownership.

Now Is the Time to Act!

If you’re considering buying a home or renewing your mortgage, now is the perfect time to start planning. These changes give you more options than ever, whether you’re a first-time buyer looking for flexibility or a homeowner ready to renew your mortgage without the stress test hanging over your head.

Want to discuss how these updates could impact your home buying journey? Let’s connect and figure out the best strategy for you!

Starting December 15, 2024, homes priced up to $1.5 million will qualify for an insured mortgage, up from the previous cap of $1 million.

A longer amortization period means smaller monthly payments since you’re spreading the loan over more years. However, keep in mind that while monthly payments are lower, you’ll pay more interest over the life of the mortgage.

No! From December 2024, the stress test will no longer be required when switching lenders at the time of mortgage renewal, making it easier to shop around for better rates.