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Finally! Some mortgage rule changes! After years of little movement, the Canadian government has finally introduced some significant mortgage rule changes. Four new rules have emerged, and our team at BM Select has dug into what these changes mean for you. Here's our detailed analysis:
| | | | | | | | Since 2012, CMHC insured mortgages (less than 20% down payment) were limited to a 25-year amortization, while conventional mortgages (20% down payment or more) enjoyed amortizations up to 30 years. This resulted in higher monthly payments and lower purchasing power for insured buyers. The new rule, effective December 15th of this year, allows insured mortgages to stretch to 30 years, BUT only for first-time homebuyers OR those purchasing new construction homes. Rating: 2/5 Analysis: While this provides relief for first-time buyers and promotes new construction, the restriction leaves out many other borrowers. A more impactful move would have been to extend the 30-year amortization to all insured mortgages. Further incentives, such as a 35-year amortization for first-time buyers and new construction, would have provided a more meaningful push for market stimulation. The current rule seems more politically driven than a comprehensive solution to affordability.
| | | | | | | | Since 2014, insured mortgages (with less than 20% down) have been limited to homes priced under $1,000,000. As of December 15th, 2024, the maximum price for an insured mortgage increases to $1,500,000, allowing homebuyers to purchase more expensive homes with a minimum down payment of $125,000 (5% on the first $500K and 10% on the remaining $1M). Rating: 2/5 Analysis: This update is long overdue. With the rapid rise in housing prices over the past decade, the $1M cap had become outdated. However, this change only plays catch-up with market conditions. Ideally, the maximum purchase price for insured mortgages should be tied to housing market indices and reviewed annually. Additionally, the cap should vary by region to reflect differing market conditions across the country. For example, a $1.5M home in Toronto or Vancouver is far different than in smaller provinces like Nova Scotia.
| | | | | | | | Introduced in 2017, the mortgage stress test ensured that borrowers could handle higher interest rates, even if they were renewing or switching lenders. This test made it challenging for homeowners to switch to better rates, locking them into unfavorable deals. Now, the stress test has been removed for SWITCH applications—those where the mortgage amount and amortization remain unchanged at renewal. This rule change goes into effect for all mortgage applications submitted after November 21st of this year. Rating: 4/5 Analysis: This is a well-overdue rule change and offers more flexibility for homeowners at renewal. By removing the stress test for switches, mortgage holders can now more easily shop for better rates when their term is up. This change will likely save many homeowners substantial amounts in interest over time. However, the restriction that this rule applies only to SWITCHES (not refinances) keeps it from being a perfect solution. A more comprehensive fix would have addressed stress testing across all mortgage applications, particularly in a high-interest rate environment. | | | | | | | | | | | | After stepping away from insuring refinances over 80% loan-to-value in 2012, CMHC has re-entered the refinance market... but with a twist. As of January 15th, next year, homeowners can refinance up to 90% of their home's value—but only if they are adding at least one additional unit to their home or property. The refinance is also limited to primary residences only, excluding rental properties and the property value cannot exceed $2,000,000 Rating: 3/5 Analysis: This is a positive change, albeit somewhat limited in scope. It offers an opportunity for homeowners to add rental income through home improvements, helping with affordability. While not a widely applicable rule, we see clients already interested in taking advantage of this program. The political timing is notable, as many Canadians are struggling with mortgage payments, and adding rental income could ease some financial pressures. Hopefully, this signals more CMHC programs amendments to come. | | | | | | | | How did you like our report? Send us an email at info@bmselect.ca and let us know. Have questions about how these rule changes impact your mortgage, or are you nearing a renewal and want to explore your options? Feel free to reach out to our team of Mortgage Experts at Better Mortgage Select. For more information on these rule changes, check out the video below from our Operations Manager, Lorenzo Podda:
| | | | | | | | | | Just a friendly reminder to come visit us on our socials, where we put out a ton of videos with tips and information to help you navigate the wild world of mortgages! Check out the links below and give us a follow! | | | | | | | | | | | | | | | | As always, if you have any questions or want to do some mortgage planning, feel free to reach out to us at: | | | | | | | |
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