Regulatory changes applicable from December 15, 2024 by OSFI aimed at benefiting First Time Home Buyers, and Home Owners with mortgages Maturing for Re-Negotiation.
These updates reflect the federal government’s expanded eligibility criteria for for high-ratio insured mortgages allowing first time home buyers to purchase with less than 20% down payment, and are designed to help more Canadians achieve their dream of homeownership. In my opinion these rules will have limited impact to benefit home buyers, and is evidently more a political publicity stunt gearing up for coming elections.
“The Liberal government is now panicking over housing because the Conservatives are owning the housing fight,” CIBC economist Benjamin Tal said during a recent talk. “Everybody realizes that housing is the number one file and will be determining who is going to govern after the next election,” he added. “There could be more moves coming in the fiscal update.”
Extended Amortization Options
Maximum 30 year amortization (previously 25 year) will now be available for:
- First-time homebuyers OR
- Borrowers that are purchasing a new build property.
* Property must be owner-occupied or occupied by a family member on a rent-free basis.
First-time homebuyers are defined as:
- A borrower that has never purchased a home before, OR
- A borrower that has not occupied a home as a principal residence that either they themselves or their current spouse or common-law partner owned in the last 4 years, OR
- A borrower who recently experienced the breakdown of a marriage or common-law partnership.
Increased Maximum Property Value
The maximum purchase price for high-ratio insured mortgages (LTV greater than 80%) has increased to $1,499,999 (Previously $1 Million).
Please note downpayment requirements for the loan are as follows:
- 5% down payment on the portion of a purchase price up to $500,000.
- 10% down payment on the remainder of the lending value (i.e. purchase price between $500,000 and under $1,499,999).
Eligible Applications
These changes apply to:
- New applications on or after December 15th, 2024
- Existing applications resubmitted to the insurer on or after December 15th, prior to full advancement of the loan
- Both changes will apply to applicants requiring high-ratio mortgage insurance (required when purchasing with a loan-to-value greater than 80%).
Summary of Key changes:
30-year amortization for insured mortgages
Starting 30-year amortizations will be available for insured mortgages. This option is open to first-time homebuyers and those purchasing newly built homes, including condos.
Higher insured mortgage limits
Applications for insured mortgages will now be accepted for properties valued under $1.5 million, giving more buyers access to high-value homes with lower down payment requirements.
Renewal Mortgage Stress test simplification
Eligible insured transfers and switches will be qualified at the contract rate. Current stress test requirements will continue for insurable, uninsurable, and uninsured applications.
Benefits to You:
Reduced monthly payments
Extending amortizations to 30 years will lower monthly payments allowing higher affordability amidst rising living costs and fluctuating interest rates. However increased amortization results in more interest paid over the life of the loan, and also a higher mortgage default insurance premium resulting in an increased cost of borrowing.
Expanded opportunities for buyers
Higher insured mortgage limits make it possible for more Canadians to purchase homes in competitive urban markets like Toronto and Vancouver. Reality however, very few first-time home buyers are purchasing close to or above $1 Million in purchase price.
More options at maturity
Qualifying at contract rate to transfer/switch your mortgage to a new lender to obtain better rates and lower payments, as opposed to having to qualify at higher benchmark rates under current lending rules to could force you to renew with your current lender if you don’t qualify.