Ottawa relaxes mortgage regulations, allowing for longer amortization periods and increased insured mortgage limits

September 16, 2024 TruthUSA

Finance Minister Chrystia Freeland has announced two significant changes to the federal mortgage policy. These changes include increasing the cap on insured mortgages to $1.5 million from $1 million and expanding eligibility criteria for 30-year mortgage amortizations to cover first-time homebuyers.

Both changes will take effect on Dec. 15, as Freeland informed reporters during a press conference on Sept. 16. Press conference details here.

The goal of raising the insurance threshold to $1.5 million is to assist first-time homebuyers in urban areas where home prices often exceed $1 million. This change will allow buyers to qualify for an insured mortgage with a down payment of less than 20 percent.

Freeland noted that the current price limit of $1 million on insured mortgages dates back to 2012. She stated, “The Canadian economy and the market have evolved significantly since then. Canada’s nominal GDP has increased by 65 percent. It was time to reassess that figure, and this change will have a tangible impact on thousands, even millions, of Canadians.”

The Liberal’s 2024 budget introduced a change on Aug. 1, allowing 30-year mortgage amortizations for first-time homebuyers purchasing new builds. The recent announcement on Sept. 16 builds upon that initiative.

Now, first-time homebuyers or those purchasing newly constructed homes, including condos, will be able to take out loans for 30-year periods instead of the previous maximum of 25-year plans.

The change aims to lower the cost of monthly mortgage payments and make homeownership more accessible to Canadians, according to Freeland. She stated, “This is primarily a supply-side measure. It’s about stimulating demand for new builds because we recognize the urgent need to construct more homes.”

Freeland made this announcement during a news conference on Parliament Hill to mark the first House of Commons sitting since June.

Recent polls indicate that voters are increasingly concerned about issues related to housing affordability and the overall cost of living.

These new measures are part of the federal government’s plan to construct nearly 4 million new homes, as outlined in a press release.

The Liberals intend to introduce regulatory amendments to implement these proposals and will provide further details in the upcoming weeks.

Insured mortgages currently require a minimum down payment of 5 percent for homes priced at $500,000 or less, according to the existing regulations. For instance, a $400,000 home would necessitate a minimum down payment of $20,000.
More information here.

For homes priced above $500,000, buyers must provide a minimum 5 percent down payment and 10 percent down payment on the remaining balance.

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