Higher Mortgage Cap and Relief for First Time Buyers

I want to cover two new pieces of news the Canadian government officially announced. One is about a higher price cap for insured mortgages, and the other is about changes to the repayment period on mortgages for first time home buyers. I am Moe Asgarian, a senior real estate broker in Toronto, ranked number 47 worldwide at RE/MAX, and I will walk through these upcoming mortgage changes.

Two kinds of mortgage

If you have seen my videos, you may recall that there are broadly two kinds of mortgage. One group is where the buyer puts 20 percent or more down and takes a loan. These are called uninsured, meaning no insurance is added on top. The second group is insured mortgages. The main feature is that buyers put less than 20 percent down, and the government and official mortgage bodies in Canada add insurance to these loans to feel secure about repayment. So if you take a mortgage with, say, 16 percent down, your loan is insured.

The higher insured mortgage cap

One thing about these loans was that you could only get them up to a cap of under 1 million dollars. You could buy a property and seek an insured mortgage only if it was at most 999,999 dollars, under 1 million. But the new announcement is that this cap rose from 1 million to 1.5 million dollars. So soon, anyone wanting an insured mortgage can buy a property up to 1.5 million and put less than 20 percent down. What does that mean? More people are encouraged to enter the market and buy, especially in the higher priced segment, where sales in cities like Toronto have been low in recent months. So the number of people who qualify with less than 20 percent down grows, because they can now buy up to 1.5 million, and that gives buyers more room.

Relief for first time buyers

The second piece of news is something I actually proposed in one of my videos. A rule announced in April 2024 was about first time home buyers: if they bought a newly built home, they could extend the mortgage term from 25 years to 30 years, which lowers the monthly payment. The new announcement is that the build year no longer matters. First time buyers can buy any home, new or old, and use this benefit, extending the repayment to 30 years.

The trade off with a longer term

As I explained in detail before, extending the repayment period means you effectively pay more interest to the bank. But the upside is that in the early years, when family income may still be low, the monthly payment is lighter, and the government hopes this encourages first time buyers. Let me give an example. Based on August figures, the average home price is 649,000 dollars. If we extend the repayment from 25 to 30 years, the monthly payment drops by about 300 dollars a month, roughly 3,600 dollars a year.

When these rules take effect

The government will announce more details on both plans soon, and the rules take effect from December 2024. I felt it was worth explaining these two important pieces of news, and I hope this helps. If you are a first time home buyer, or among those whose down payment is under 20 percent, these two changes are useful to you. If you'd like a straight answer for your own situation, fill out the form below and book a free consultation. Stay well and take care.