December 15th, 2024 Mortgage Rule Changes.

On September 24, 2024 The Government of Canada announced significant changes to the mortgage rules qualifications.

The two changes are:

• Increasing the $1M price cap for insured mortgages to $1.5M.
• Expanding the eligibility for the 30-year mortgage amortizations to all first-time home buyers, and to all home buyers of preconstruction homes.

Increasing the $1M price cap from $1M to $1.5M for insured mortgages.

This is a significant change for buyers who could afford to purchase a property priced between $1M and $1.5M based on their income, but didn’t have enough to come up with the 20% down payment.

Under the old rules (prior to December 15^th, 2024), the minimum down-payment for the homes prices up to $500K was 5%, for the price range between $500K and $1M the minimum down-payment was 10%. Homes sold for $1M or more required full 20% down- payment.

Under the new rules the 5% is still required for the first $500K, but now the 10% covers the price range from $500K to $1.5M, and the full down-payment of 20% is required for properties selling for $1.5M or more.

Here are couple of examples showing the significance of this change.

Property A sold for $1.1M  prior to December 15^th, 2024 required a minimum down-payment of $220,000, the same property sold after December 15^th, 2024 requires a minimum down-payment of $85,000, a decrease of $135,000.

Property B sold for $1.45M  prior to December 15^th, 2024 required a minimum down-payment of $290,000, the same property sold after December 15^th, 2024 requires a minimum down-payment of $120,000, a decrease of $170,000.

The policy changes don’t affect the minimum required down-payment for properties sold for less than $1M and more than $1.5M.

Expanding the eligibility for the 30-year mortgage amortizations to all first-time home buyers, and to all home buyers of preconstruction homes.

The goal of this incentive is to spur the construction of new homes including condos and to reduce the monthly payments for the buyers of preconstruction properties.

It is important to understand that while the monthly payments will go down, the overall interest paid on the mortgage will increase due to the extended amortization period.

TD Economist Rishi Sondhi issued a short commentary on the subject which we found it to be an interesting read.

Please let us know if you have any questions.

Thank you.