The new insured mortgage rule changes have come into effect now and here is your guide to them!
1. Cap on insured mortgages increasing from $1M to $1.5M
– with this change, it will be possible to buy a primary residence upto $1,499,999 and not have to put down 20%
– minimum down payment rules are still in place: 5% of the 1st $500,000, 10% of the balance
– you DO NOT have to be a first-time home buyer to be eligible
– buyers will still have to pay mortgage insurance if they do not have 20% down and of course qualify for mortgage amount
– rentals do not apply
Some examples:
$1,000,000 purchase – min down payment now $75,000, was $200,000 before
$1,250,000 purchase – min down payment now $100,000, was $250,000 before
$1,499,000 purchase – min down payment now $125,000, was $300,000 before
$1,500,000 and over – 20% down required
2. 30-year amortizations available on insured mortgages for:
First-time home buyers* on all builds OR,
All other buyers on new builds/pre-sales
– this help increase buying power – pre-approval amounts will increase by about 7%
– this help lower mortgage payments (by ~$50/mo per 100k they borrow)
– previously the max was 25 years for insured mortgages
– buyers will still need to pay mortgage insurance with less than 20% down
– property must be owner-occupied OR occupied by a family member rent-free
– rentals do not apply
*First-time home buyers are defined as:
– a borrower that has never purchased a home before, or
– a borrower that has not occupied a home as a principal residence that either they themselves or their current spouse or common-law partner owned in the last 4 years, or
– a borrower who recently experienced the breakdown of a marriage or common-law partnership
OTHER NOTES / FAQ’s:
– I feel we will see these changes mainly increase activity in the $1-$1.3M range. Above that, income qualifying might become difficult and also the high cost of the mortgage insurance.
– on the listing side, we may see long-listed property prices in that range shift slightly to get under that $1.5M threshold to open up the buyer pool.
– if a client has already been approved for a mortgage prior to today and the purchase has yet to close, they can go back to get their mortgage re-approved if any of the above applies to them
– these changes all relate to insured mortgages (less than 20% down)
– there are no changes for uninsured mortgages – down payment required is still 20% and 30 year AM is still available
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Text prepared by:
Zaheed Valli-Hasham | Senior Mortgage Broker | City Wide Mortgage Services
2020 Canadian Mortgage Broker of the Year – 3x Finalist (’21, ’23, ’24)
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