Mortgages updates means big changes for buyers, sellers and homeowners in Canada

What you need to know about Canada’s mortgage rule changes in 2024

The Canadian housing market has faced an affordability crisis for years, and in response, the government has introduced key changes to mortgage regulations in 2024. While these updates are designed to help more Canadians enter the housing market, they also bring challenges. Let’s dive into what’s new and how it impacts both new and existing homeowners.

1. Increased insured mortgage cap

One of the most impactful changes for buyers is the increase in the insured mortgage cap from $1 million to $1.5 million. This means you can now qualify for a mortgage with a smaller down payment (less than 20%) on homes worth up to $1.5 million. The idea here is to help more Canadians, especially in expensive markets like Vancouver and Toronto, secure homes without needing a huge upfront deposit.

However, this could fuel demand, which might push prices even higher in already hot markets. It’s a double-edged sword — more people can afford homes, but competition could also intensify.

2. Longer amortization period for some buyers

If you’re a first-time buyer or purchasing a newly built home, you can now extend your mortgage amortization to 30 years instead of the usual 25. This lowers your monthly payments, making homeownership more affordable in the short term. However, be aware that stretching payments over a longer period will increase the total interest paid over the life of your loan.

While this change can help you get into a home, the long-term cost may be substantial, especially if interest rates rise in the future.

3. More flexibility when renewing your mortgage

Homeowners with insured mortgages no longer need to pass the mortgage stress test when facing a mortgage renewal. That’s because you can now shop the mortgage market and find the best rate. Prior to this change, switching your mortgage lender meant having to pass the mortgage stress test, again. With these mortgage changes, homeowners facing a mortgage renewal can shop around for better rates without the added stress of requalifying. This should boost competition among lenders, potentially offering you more favourable terms.

For anyone stuck with unfavorable rates or mortgage terms, this change can be a game-changer, giving you more power to negotiate better deals.

4. Potential pitfalls and risks

While these changes bring some relief, they come with risks. Increasing demand without increasing housing supply could worsen affordability in major cities. Moreover, extending the amortization on the mortgage to 30 years may lower your monthly costs but it will increase your vulnerability to rising interest rates over time — and will force you to pay more, in the long run, for your home.

First-time buyers, in particular, might find it harder to keep up with escalating prices, even if they qualify for larger mortgages. Long-term financial planning becomes essential in this environment.

Bottom Line

Canada’s 2024 mortgage rule changes aim to balance accessibility with market stability, but the real impact will depend on how both buyers and the housing market respond. If you’re navigating these changes, now might be a good time to review your financial situation, explore your mortgage options, and consult a mortgage advisor to ensure you’re making informed decisions.

For more information on these changes, check out resources like True North Mortgage and Money.ca to stay updated on the latest developments.