Recent Changes to Mortgage Rules: What They Mean for Borrowers
The government has recently announced important changes to mortgage amortization and insurance rules that could significantly impact homebuyers. These changes, set to take effect on December 15, 2024, aim to make homeownership more accessible, especially for those looking to purchase homes in higher price ranges or with lower down payments. Here’s a breakdown of the key changes and how they may benefit you as a borrower.
1. Increase the Purchase Price for Insured Mortgages from $1 Million to $1.5 Million
Effective December 15, 2024, the government will raise the maximum purchase price for insured mortgages from $1 million to $1.5 million. This is the first increase to the insured mortgage limit since 2012.
What does this mean for you? If you’re looking to purchase a home valued over $1 million but don’t have the full 20% down payment, you can still qualify for an insured mortgage. For example, with a down payment of $95,000, you could now afford to purchase a home for up to $1.2 million—an increase of $200,000 from the previous limit.
Who benefits from this change? This update is especially helpful for buyers who can qualify for a larger mortgage but are unable to meet the 20% down payment requirement. If you’re considering a property priced between $1 million and $1.5 million, these changes could make it easier to secure financing with a smaller down payment.
2. Increase Amortization to 30 Years for Buyers of New Builds
Another key change is the increase in amortization periods for buyers purchasing new construction. The maximum amortization period will be extended from 25 to 30 years for all buyers of new builds.
What does this mean for you? With a longer amortization period, you can qualify for a larger mortgage. If, for example, you’re currently qualifying for a $750,000 mortgage, this change would allow you to qualify for approximately $805,000—without changing your monthly payments. The extended amortization also helps reduce monthly mortgage payments, making it more affordable to purchase a higher-priced property.
Who benefits from this change? This rule benefits anyone purchasing a new home or unit in a new development, particularly if the purchase price is $1.5 million or more. It also applies to those with presale agreements closing after December 15, 2024, or anyone purchasing an assignment of a presale.
3. Increase Amortization to 30 Years for First-Time Homebuyers
First-time homebuyers will also benefit from an increase in amortization periods. The maximum amortization for first-time buyers of both new and existing homes will increase from 25 to 30 years.
What does this mean for you? For first-time homebuyers, this change opens up a wider range of properties to consider, including those priced up to $1.5 million. A longer amortization period means lower monthly payments and the potential to qualify for a larger mortgage. For example, if you’re qualifying for a $1,000,000 mortgage under the current rules, you could now qualify for a mortgage of up to $1,072,000. If you have a down payment of $95,000, this would allow you to purchase a home priced up to $1,167,000.
Who benefits from this change? This change is particularly advantageous for first-time homebuyers who are looking at both new and existing homes. The extended amortization period will give them greater flexibility when it comes to affordability, making it easier to enter the housing market and buy homes priced up to $1.5 million.
How These Changes Can Help You
These recent changes to mortgage rules are designed to increase accessibility for borrowers, especially those looking at higher-priced homes or those struggling to come up with a 20% down payment. By increasing the maximum insured mortgage limit, offering longer amortization periods, and expanding eligibility for first-time homebuyers, these new rules provide more options and flexibility to navigate today’s housing market.
Whether you’re purchasing a new build, a resale home, or looking to break into the market as a first-time buyer, these changes could make a big difference in how much you can afford, how much you need to pay upfront, and how easily you can manage your monthly payments.
If you’re unsure about how these new rules apply to your situation or you’d like help navigating the mortgage process, feel free to reach out and book a call to discuss your options. With the right guidance, these changes could open the door to your dream home.
