The Rules They are A-Changin'

Are you a first-time homebuyer? Or looking to purchase a new build?

Well, if either of those applies to you, you must have heard about the changing rules surrounding amortizations.

Many people are simply sitting on the sidelines, waiting for prices to drop so they can get into the market. But what if homes are actually becoming more affordable - even without prices coming down or a market crash?

But, you may ask, how does that work? Isn’t affordability always related to price?

Well, we already let you know in our previous blog post, The Changing Landscape of Home Financing, that changes are happening. Most of these changes are set to take place on December 15th, 2024, and as they say, timing is everything - so it’s important to understand why and how these changes might affect you - and how you can use this to your benefit.

With amortization periods for insured mortgages being increased to 30 years, monthly payments can be much more affordable for those looking to get into the market for the first time. With amortization periods being increased, that means that the mortgage payments can be spread over a longer period.

While high monthly payments have been a barrier to first-time home buyers in the past, this change now means more flexibility for those who can’t fit such high monthly payments into the budget and also possibly allowing them to qualify for more expensive homes.

This new 30 year amortization period also includes new builds and is available to all buyers, not just first time home buyers. This is a move to make new homes more affordable, and to also alleviate housing shortages by allowing buyers to be able to qualify for these new builds.

Now, it is important to note that while lower payments are an advantage to help you qualify, it does mean paying more interest on your loan. Definitely something to keep in mind, but perhaps not something to keep you out of the market completely or to stop you from taking advantage of these mortgage changes if they are right for you.

Included in these changes is also a price cap increase for insured mortgages - the first one since 2012!

Insured mortgages are mortgages that are loaning beyond 80% of the property value - meaning that the buyer put down less than 20% down. Due to the higher risk for lenders, any home purchased in Canada with less than 20% down payment must be insured. The borrower then pays an insurance premium on their mortgage.

The price cap increasing from $999,999 to $1,499,999 means that more Canadians will be able to qualify for a mortgage without a full 20% down payment. This means that less money will need to be put down up front in order to qualify for a mortgage, allowing for more buyers to be able to get their foot in the door.

Some more good news: alongside these changes, the minimum requirements still stay the same. 5% down payment on the portion up to $500,000, and 10% on the portion between $500,000 and $1.5 million.

Now the big question with these changes is: do we buy or sell now or later?

Well, it’s tough to say - depending on your situation, market fluctuations, and any unforeseen variables, everyone’s situation is personalized and different.

But here are some things to keep in mind:

Prices may rise when the new rules take effect, as homebuyers can now qualify for more with lower monthly payments. Purchasing before December could mean less competition and potentially lower prices.

With the lower rates & now the 30-year amortization period, we can only expect to see an increase in demand for homes and buyers starting to come back to the market.

If you want to sell later, especially if your home is priced between $1 - $1.5 million, waiting to list until after December 15th could attract more qualified buyers & possibly even higher offers if homebuyers are able to qualify for more expensive homes. Historically, higher demand leads to higher prices - a win for potential sellers.

Well, if that doesn’t give you plenty to think about and chat about over your Thanksgiving dinner this weekend, I don’t know what will - but maybe it’s just us Realtors® that like to talk turkey over our turkey.

As always, we are here to help you understand and navigate these changes in real time as they are happening. We are always available, so please feel free to reach out to any one of our agents to ask more questions about these changes and how they could potentially benefit you.

We’re always thankful for all of our readers who follow along with our blog posts and support our publications, but with Thanksgiving coming up, we would like to just take an extra moment to share our gratitude for all our readers. Thank you for reading our blogs, subscribing, and giving us your feedback - we truly are part of such a great community & we have so much to be grateful for!

Happy Thanksgiving!

Paul Fitzpatrick

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