Upcoming Changes to Mortgage Insurance Rules in Canada

Starting December 15, 2024, significant updates will be made to the rules governing default insured mortgages in Canada. These changes are designed to improve access to homeownership and align mortgage insurance policies with the current housing market. Here are the key updates:

1. Increase in Mortgage Insurance Price Cap

The price cap for homes eligible for mortgage insurance will rise from $1 million to $1.5 million. This change aims to provide more flexibility for buyers, particularly in expensive markets, by making it possible to secure insurance for higher-priced homes with a smaller down payment.

Eligibility Requirements:

• The value of the eligible residential property against which the loan is secured must be less than $1.5 million; and, the downpayment requirements for the loan are as follows:
• 5 per cent on the portion of a purchase price up to $500,000.
• 10 per cent on the portion of a purchase price between $500,000 and under $1.5 million.

2. 30-Year Mortgage Amortizations for Certain Buyers

Expanded eligibility for 30-year amortizations will be introduced, specifically for first-time homebuyers and buyers of newly constructed homes. This change, applicable to those with high-ratio mortgages (down payments of less than 20% and loan-to-value ratios above 80%), aims to make mortgage payments more manageable by spreading them over a longer term.

Who Qualifies?

All first-time homebuyers, defined as individuals who have not previously purchased a home or occupied a home as their primary residence within the last four years.

All buyers purchasing newly built homes.

3. Definition of First-Time Homebuyer

To qualify for the above provisions, first-time homebuyers must meet at least one of the following criteria:

Have never owned a home before.

Have not lived in a home owned by themselves, their spouse, or their common-law partner in the past four years.

Recently experienced the breakdown of a marriage or common-law partnership.

These changes reflect feedback from both consumers and industry experts, aiming to enhance housing affordability and accessibility across Canada. For further details on the changes, you can refer to the default insurance providers CMHC, Sagen or Canada Guaranty for more detailed?information.