As of August 1, first-time buyers with an insured mortgage could amortize their mortgage over 30 years. This measure was announced in the 2024 federal budget last spring. However, the federal government has just announced other measures to relax mortgage rules and make home ownership more accessible. As of December 15, all first-time or newly built home buyers will now be able to amortize their mortgage over 30 years. Ottawa has also announced an increase in the price ceiling for insured mortgages. In this article, we explain these two changes.
Last Monday, the Government of Canada’s Finance Minister, Chrystia Freeland, announced two measures to relax mortgage lending rules:
Here’s more information on each of these changes.
As announced in the 2024 federal budget, first-time buyers of newly built properties with an insured mortgage can amortize their mortgage over 30 years as of August 1.
Mortgage amortization is the time it takes to pay off your mortgage in full. Increasing the mortgage term reduces your monthly payments, increasing the total interest paid over the life of the mortgage.
But as of December 15, eligibility for mortgages amortized over 30 years will be extended. All first-time or newly built home buyers will now be able to amortize their mortgage over 30 years.
In other words, 30-year mortgage amortization will no longer be limited to first-time homebuyers with a down payment of less than 20%. First-time buyers (whether new construction or existing property) and new construction buyers (whether first-time buyers or not) will be able to take out a mortgage with a 30-year amortization.
The second measure announced to facilitate access to home ownership concerns the price ceiling for insured mortgages.
Insured mortgage: When home-buyers make a down payment of less than 20%, they are required to obtain mortgage loan insurance such as CMHC.
The federal government has decided to raise the price ceiling for insured mortgages from $1 million to $1.5 million. This amount had not been adjusted since 2012. As of December 15, borrowers who do not have a minimum down payment of 20% (and who must have mortgage loan insurance) will be able to buy a property of up to $1.5 million.
In Ottawa, the Minister of Finance maintains that these measures are intended to stimulate supply by building new housing. But what is really happening?
Widening eligibility for 30-year mortgages will certainly increase buyers’ borrowing capacity. It will also reduce homeowners’ monthly payments, which is desirable given the high inflation of recent years.
But these measures could have the opposite effect… In fact, an increase in borrowing capacity will stimulate demand. In the absence of measures to increase supply, house prices could rise.
Plus, repaying a mortgage over a longer period will increase the total interest paid over the life of the mortgage. That said, don’t forget that amortization is the maximum term of a mortgage. But, you can reduce the term of your loan by accelerating repayment (or reducing amortization at mortgage renewal). In other words, you can’t lengthen a mortgage, but you can shorten it by accelerating repayment.
Finally, the key rate cuts of recent months (and those to come) could also have an impact on house prices. In this context, housing supply measures might have been preferable.
In addition to new rules to facilitate access to home ownership, mortgage rates have been reduced since the Bank of Canada announced its recent key rate cuts. If you need to renew your mortgage soon, you’ll have several options:
With a down payment of at least 20% of the purchase price, you can pay off a mortgage over a period longer than 25 years. As of December 15, all first-time and new home buyers will now be able to amortize their mortgage over 30 years.
Taking out a 30-year mortgage increases your borrowing capacity and reduces your monthly payments. However, repaying your mortgage over a longer period will increase the total interest paid over the life of your mortgage.
In Canada, you can obtain a mortgage with a 30-year amortization based on eligibility criteria. However, the interest rate varies according to the type of mortgage (e.g. fixed or variable), the term of the loan (e.g. 30 years), the term chosen (e.g. 5 years) and your financial situation (debt ratio, credit rating, etc.). To compare banks’ mortgage rates, try our mortgage rate comparator.
Savings are here:
