What to know about Canada's new mortgage rules, according to a broker

Canada has introduced new mortgage rules aimed at making homeownership more accessible. Starting December 15, 2024, the cap for insured mortgages has increased from $1 million to $1.5 million. This change allows buyers of homes valued above $1 million to qualify for smaller down payments, reducing the previous requirement of at least 20% down for such properties.

Additionally, first-time homebuyers and purchasers of newly built homes with insured mortgages can now opt for 30-year amortization periods, up from the previous 25-year limit. This extension aims to make monthly payments more manageable for borrowers, potentially easing the financial burden for those entering the housing market.

Mortgage broker Mary Sialtsis believes these changes will open new opportunities for buyers, particularly in urban areas where home prices often exceed $1 million. She notes that the increased insured mortgage cap could ease competition for homes below the $1 million mark, as buyers now have more flexibility in their purchasing power.

However, some experts caution that longer amortization periods may lead to higher overall interest payments. Sialtsis advises borrowers to consider strategies like bi-weekly payments or extra contributions to mitigate this effect. Additionally, while the new refinancing options for building additional dwelling units aim to increase housing density, their impact may be limited in addressing the broader housing supply issues.

Despite these measures, concerns remain about housing affordability. Economist Benjamin Tal suggests that additional policies may be needed, as the housing market continues to be a significant political issue. He anticipates further changes to be announced in upcoming economic updates, reflecting the government's ongoing efforts to address the housing crisis.

In summary, Canada's new mortgage rules provide increased flexibility for homebuyers, particularly first-time purchasers and those in high-priced urban markets. While these changes are expected to assist more Canadians in achieving homeownership, experts recommend careful financial planning to navigate potential long-term costs associated with extended mortgage terms.