New rules for mortgages in Canada

In September the federal government announced mortgage rule changes. Here’s a look at some of them. The changes went into effect on Dec. 15, 2024.

Increased insured mortgage cap

The maximum price for insured mortgages increased from $1 million to $1.5 million, which could open the doors for some buyers, although most likely only in higher priced markets. The rules for down payments will remain the same:

• 5% on the first $500,000 of the purchase price

• 10% on the portion between $500,000 and $1.5 million

For example, someone buying a $1.5-million home now requires a $125,000 down payment—which is much less than the $300,000 needed for an uninsured mortgage under the old rules.

Expanded 30-year amortizations

Eligibility for 30-year amortization on insured mortgages has been broadened to include all first-time homebuyers and purchasers of new builds, provided the loan-to-value ratio is 80% or higher.

The same criteria for first-time homebuyers applies such as not having owned a home in the last four years or having experienced a breakdown in a marriage or common-law relationship. These changes apply to all high-ratio mortgages on owner-occupied properties or those occupied by a close relative.

There are some possible downsides to these new rules such as higher cost of borrowings with the extended amortizations and paying more interest costs. Some have concerns that our short housing supply could lead to higher housing prices with these new measures.

New refinancing rules for secondary suites (effective Jan. 15)

Homeowners now have new opportunities to refinance their mortgages to add secondary suites to their homes. This change aims to boost housing availability and affordability.

Eligibility requirements

• Homeowners must already own the property.

• The homeowner or a close relative must live in one of the existing units.

• The additional units cannot be used as short-term rentals.

Financial parameters

• The property value must be less than $2 million.

• Homeowners can refinance up to 90% of the property value.

• The maximum amortization period is 30 years.

• Insured refinancing will be allowed for the purpose of building additional unit(s).

Legal units: The new units must be fully self-contained units (e.g., basement suites with separate entrances, laneway homes) and meet municipal zoning requirements.

Number of units: Maximum of four dwelling units including the existing unit.

There isn’t much clarity at this time about which lenders will be supporting the program, so stay tuned.

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This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.