The Government of Canada was busy the last few months, introducing major mortgage reforms to make homeownership more accessible and affordable for Canadians. Here's a summary of all the changes in one email for you:

1. Borrowers switching lenders at renewal will not need to complete the Stress Test: Canada's banking regulator, OSFI, is poised to ease mortgage rules for homeowners looking to switch lenders during mortgage renewal. Effective November 21, borrowers renewing with a different lender will no longer need to complete the mortgage stress test, simplifying the process for those with uninsured mortgages. In the past, even a straightforward renewal switch required borrowers to demonstrate their ability to manage payments at a rate 2% higher than the new mortgage contract rate. This posed significant challenges as rates climbed to 6%, bringing the stress test rate to 8%. While insured mortgages were already exempt from this requirement, uninsured borrowers will now receive similar treatment.
2. Higher insured mortgage cap: Starting December 15, 2024, the insured mortgage cap will increase from $1 million to $1.5 million—the first adjustment since 2012! This update better aligns with today's housing market, allowing more Canadians to qualify for a mortgage with less than a 20% down payment.
3. Extended 30-year amortization: Also coming into effect December 15, 2024, first-time homebuyers and new-build purchasers will be eligible for 30-year mortgage amortizations (previously capped at 25 years) on insured mortgages. The longer amortization period will help make home ownership more affordable by lowering monthly mortgage payments. The change should also encourage new home construction to help ease the housing shortage.

These reforms build on earlier initiatives from 2024, including:

• RRSP Home Buyer's Plan: The limit was raised from $35,000 to $60,000, offering Canadians more flexibility when using their savings for a home purchase.
• Permanent Amortization Relief: Homeowners facing rising mortgage payments now have long-term support through this measure.

As more details are announced I will keep you informed, but these updates are designed to create new pathways to homeownership.

Whether you're considering a move, or nearing mortgage renewal, now's the perfect time to explore your options!

Let's chat about how these reforms could benefit you. Feel free to contact me for a free, no-obligation consultation.

Recent inflation numbers indicate that inflation is slowing, and many economists are saying that the most recent drop in the inflation rate will give the Bank of Canada the slack that it needs to continue lowering their overnight rate. While this is a positive sign, it is not necessarily translating to relief in the cost of living. Many people are still seeking solutions to mitigate the effects of sky-high grocery prices and other goods on their finances. Let's take a look at one strategy that could prove to be the difference maker in providing the financial breathing room you need – mortgage amortization extensions.

To start, let us clarify what an amortization period is. It represents the duration it takes to fully pay off your mortgage through regular payments. An amortization extension, on the other hand, refers to any period beyond your initially qualified amortization.

Which Lenders and Banks Offer Amortization Extensions?

Prime lenders, who are federally regulated, typically do not offer amortization extensions beyond 30 years. However, if your current mortgage has a shorter amortization period (i.e.: 20 years), you can extend it when refinancing with them. Alternative mortgage lenders, often referred to as "non-bank" lenders, may offer extensions of 35 to 40 years, provided you have at least a 20% down payment or more than 20% equity built up.

Who Can Extend Their Mortgage and Why?

First-time home buyers are typically limited to a maximum amortization period of 25 to 30 years. Most put less than 20% down needing default mortgage insurance that restricts amortization to a maximum of 25 years. However, if they have 20% or more to put down, they can extend the amortization beyond 25 years.

In contrast, renewers may have the option to extend their amortization at the time of renewal. For example, they can go from 20 years back to 25 years or from 25 years back to 30 years to lower their monthly payments. Keep in mind that these options vary based on individual situations.

It is important to understand that extending your mortgage amortization outside of renewal would require refinancing, which may incur penalties and necessitate requalification at current rates. Nevertheless, refinancing can be a viable solution in certain circumstances. To explore your options fully, I recommend discussing your specific needs with me.

For Example ...

Imagine a young couple bought their first home 5 years ago with a $750,000 mortgage at 3.5% interest. They initially chose a 25-year amortization, making a monthly payment of $3,745. Now, at renewal, their balance is $635,000 with rates at 5.39%. They're considering extending their amortization to keep their monthly payment the same. Let's compare the numbers:

Amortization : Monthly Payment : Impact on monthly budget

20 : $4,409 : – $664

25 : $3,926  : – $181

30 : $3,622 : + $123

35 : $3,419 : + $326

40 : $3,278 : + $467

Please note that rates over 30 years are only available with subprime lending, are for illustration purposes only.

Extending your mortgage amortization can be an effective financial strategy, but as with any important financial decision, it is essential to weigh the risks and benefits carefully. If you have any questions or would like to explore your options further, please reach out to me.

As announced on September 16, 2024, the federal government is expanding eligibility for 30 year amortizations for insured mortgages to all first-time homebuyers and all purchasers of new builds, and increasing the $1 million price cap for insured mortgages to $1.5 million, effective December 15, 2024. Let’s break these down to understand what they mean.

Expanding 30-Year Mortgage Amortizations for First-Time Homebuyers and New Builds

To provide more flexibility for homebuyers, 30-year mortgage amortizations will be expanded to include all first-time homebuyers and those purchasing newly built homes. This initiative specifically applies to borrowers who require high loan-to-value mortgage insurance and must meet the following conditions:

• The total loan-to-value ratio must be 80% or higher; and
• The borrower must either be:
• 1. A first-time homebuyer, or
  2. Purchasing a newly constructed home.

Who Qualifies as a First-Time Homebuyer?

To qualify as a first-time homebuyer, the borrower must meet one of the following criteria:

• The borrower has never previously purchased a home.
• In the last four years, the borrower has not occupied a home as their principal residence that they, or their spouse/common-law partner, owned.
• The borrower has recently undergone a breakdown of a marriage or common-law relationship. This provision aligns with the Canada Revenue Agency's Home Buyers’ Plan rules.

What Qualifies as a Newly Constructed Home?

A home is considered newly constructed if it has not been previously occupied for residential purposes. This definition includes newly built condominiums, even if there has been an interim occupancy period prior to closing.

Increasing the Insured Mortgage Price Cap to $1.5 Million

The cap on property values eligible for insured mortgages will be increased from $1 million to $1.5 million, providing buyers in higher-priced markets greater access to insurance-backed mortgages. This measure applies to borrowers needing high loan-to-value mortgage insurance and requires that:

• The total loan-to-value ratio is 80% or higher;
• The value of the property securing the loan is less than $1.5 million; and
• The down payment must meet the following requirements:
• • 5% on the portion of the purchase price up to $500,000.
  • 10% on the portion between $500,000 and $1.5 million.

Important Dates and Additional Requirements

• Effective Date: These measures will apply to mortgage insurance applications submitted to lenders on or after December 15, 2024.
• Occupancy Requirement: These provisions only apply to high loan-to-value mortgages on homes occupied by the borrower or a close relative.
• Other Criteria: All existing eligibility criteria for government-backed mortgage insurance will remain in effect.

This expansion of eligibility and the increased price cap aim to make homeownership more attainable for first-time buyers and those investing in newly built properties, especially in competitive markets across Canada.

As always, reach out if you have any questions.