The federal government has introduced significant mortgage reforms aimed at improving affordability and access to homeownership, particularly for first-time buyers.

Key Changes Effective December 15, 2024:

1. Increased Insured Mortgage Cap:

   • Raised from $1 million to $1.5 million, allowing buyers with smaller down payments (<20%) to qualify for homes in higher price ranges.
     
     

2. 30-Year Amortizations Expanded:

   • Available to all first-time homebuyers and all buyers of new builds, reducing monthly payments and encouraging new housing construction.
   • Builds on the August 2024 reform allowing 30-year amortizations for first-time buyers of new builds.
     
     

3. Switch Lenders at Renewal Without Stress Test:

   • Strengthened Canadian Mortgage Charter lets insured mortgage holders switch lenders at renewal without requalifying, increasing competition and affordability.

Additional Measures to Help Home Buyers:

• Tax-Free First Home Savings Account:

  • Save up to $40,000 tax-free for a down payment.

• Enhanced Home Buyers’ Plan:

  • Withdraw up to $60,000 from RRSPs for a down payment (up from $35,000).

• Home Buyers’ Bill of Rights:

  • Aims to standardize leases, protect against blind bidding, and increase transparency in the home-buying process.

Impact:

These reforms aim to unlock homeownership for younger Canadians, address housing shortages, and make the mortgage process more competitive, transparent, and affordable.

Here’s a breakdown of the financial changes for lowered down payments under the new mortgage rules effective December 15, 2024:

Previous Rules

• Insured mortgages were capped at $1 million.
• Buyers needed at least 20% down for homes priced above $1 million.

New Rules

• The insured mortgage cap increases to $1.5 million, allowing buyers to purchase higher-priced homes with less than 20% down.
• Down payment requirements follow a tiered structure:

Down Payment Calculation (New Rules)

For homes up to $1.5 million:

1. 5% of the first $500,000.
2. 10% of the portion between $500,001 and $1.5 million.

Examples:

• $800,000 Home

  • 5% of $500,000 = $25,000
  • 10% of $300,000 = $30,000
  • Total Down Payment: $55,000 (6.9%)

• $1.2 Million Home

  • 5% of $500,000 = $25,000
  • 10% of $700,000 = $70,000
  • Total Down Payment: $95,000 (7.9%)

• $1.5 Million Home

  • 5% of $500,000 = $25,000
  • 10% of $1,000,000 = $100,000
  • Total Down Payment: $125,000 (8.3%)

For Homes Above $1.5 Million

• Down payments of 20% or more are still required.
• These properties do not qualify for insured mortgages.

How It Helps Buyers

1. Lower Upfront Costs:
   • Buyers can access higher-priced homes with smaller initial savings.
2. Boosts Affordability:
   • Smaller down payments make entry into competitive markets more attainable.
3. Encourages New Builds:
   • Expanded 30-year amortizations for new builds reduce monthly payment strain.

This change, combined with 30-year amortizations, lowers financial barriers for first-time buyers while incentivizing construction of new homes to combat the housing shortage.