Understanding the New Mortgage Insurance Rule Changes (Effective December 15, 2024)

First Time Home Buyer Mohsen Ravankhah 27 Nov

A Big Step Towards Affordable Homeownership

On September 24th, 2024, the federal government unveiled new measures aimed at making homeownership more accessible for Canadians. These updates, supported by Sagen and effective December 15th, 2024, include changes to the price cap for insured mortgages and expanded eligibility for 30-year mortgage amortizations. Let’s break down what these changes mean for homebuyers.

Key Changes to Mortgage Insurance Rules

1. Increased Price Cap for Insured Mortgages

The insured mortgage price cap will rise from $1 million to $1.5 million, allowing buyers to finance higher-value homes under the high-ratio mortgage insurance program.

Eligibility Criteria:

  • Loan Amount: High-ratio insurance is required for loans with less than a 20% down payment and a loan-to-value (LTV) ratio greater than 80%.
  • Property Value: The residential property must be valued at less than $1.5 million.
  • Down Payment Requirements:
    • 5% for the first $500,000 of the home’s purchase price.
    • 10% for the portion between $500,000 and $1.5 million.

2. Expanded Eligibility for 30-Year Mortgage Amortizations

First-time homebuyers and buyers of newly built properties will now have access to 30-year amortizations under high-ratio insurance programs.

Eligibility Criteria:

  • Applies to buyers with less than a 20% down payment and an LTV greater than 80%.
  • Eligible Buyers:
    • First-time homebuyers purchasing either new or existing homes.
    • Buyers of newly constructed homes, even if they are not first-time homebuyers.
  • The definitions of first-time homebuyers and newly built homes remain unchanged.

3. Occupancy Requirements

These measures will only apply to high-ratio mortgages on homes occupied by the borrower or a close relative living rent-free.

Additional Information

  • Effective Date: Changes apply to mortgage insurance applications submitted on or after December 15, 2024, including previously submitted applications that are resubmitted.
  • Existing Criteria: All other government-guaranteed mortgage insurance criteria remain in effect.

Conclusion

The new mortgage insurance rules mark a significant step in improving housing affordability and access in Canada. By increasing the insured mortgage price cap and broadening eligibility for 30-year amortizations, the government aims to help more Canadians realize their dream of homeownership. These updates are particularly beneficial for first-time buyers and those seeking newly constructed homes, making it a pivotal moment for the housing market