Today marks an important day for insured mortgage changes that could impact you as a first-time home buyer!
What is an Insured Mortgage?
This applies when the borrower has less than a 20% down payment.
What's New in Insured Mortgages?
- 30-Year Amortizations Expanded
- Now available to first-time homebuyers (FTHBs) of any owner-occupied home, in addition to all new-build property buyers.
- Increases purchasing power (e.g., a $75,000 annual income qualifies for 7.2% more financing on a 30-year term, even with a 20 bps mortgage insurance surcharge).
- Higher Price Caps for Insured Mortgages
- The price cap has been raised from $999,999 to $1,499,999.
- This enables buyers to purchase homes up to $1.5M with smaller down payments (e.g., a $1.5M home now requires a $125K minimum down payment, compared to $300K previously).
- No Changes to the Down Payment Structure:
- 5% on the first $500,000.
- 10% on the portion between $500,000 and $1.5M.
Important Note: While FTHBs have access to minimum down payments, they may need to put more down if they cannot debt service the minimum amount.
FAQs
- Do all borrowers on the application have to meet the first-time homebuyer requirements?
- No, at least one borrower must be a first-time homebuyer on the application. For further clarity, at least one first-time homebuyer must be on title to the property.
- Are there any requirements regarding borrowers that have owned a home but have recently experienced the breakdown of a marriage or common-law partnership?
- As per the parameters released by the Government of Canada, the approach will be similar to the eligibility requirements under the Home Buyers Plan. As such, the borrower must have been living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership for a period of at least 90 days prior to the closing date of the transaction. If there is a new spouse or common-law partner that owns a property, the borrower has not occupied the home as their principal place of residence.
- How does the 4-year requirement work in the first-time homebuyer criteria?
- The criteria is consistent with the approach from the Home Buyers Plan. The 4-year period begins on January 1st of the fourth year before the closing date of the property. Example – if closing date of transaction is July 15, 2025, the borrower (or their current spouse/common-law partner) has not owned a principal residence on or after January 1, 2021.
Market Impacts
Buyers:
Any buyers you had sitting on the sidelines due to insufficient income or difficulty finding a home within their price range should re-check their numbers—this change could be what helps push them past the goal post to buying a home.
One of the other biggest challenges in high-priced markets has been the substantial down payment requirement. Starting December 15th, buyers in the $1M–$1.5M range qualify for insured minimum down payments, provided they meet debt-servicing requirements.
Sellers:
This change broadens the buyer pool, increasing the potential for higher asking prices and more competitive offers for your sellers, as increased demand typically puts upward pressure on prices.
These changes are a great opportunity to help more buyers and sellers reach their goals. If you want to chat about how this could affect your upcoming home purchase or explore options, let me know—I’d be happy to connect! Feel free to reply to this email or book a time for us to connect here.
Exciting things are ahead in the world of mortgages, and I’m here to ensure you’re ready to make the most of them!
P.S. Download My Mortgage Toolbox app to get access to premium mortgage calculators.
