Federal Government Raises CMHC Mortgage Cap to $1.5M and Expands 30-Year Amortizations for First-Time Buyers
In a bid to improve housing affordability and broaden access to homeownership, the federal government has introduced significant changes to Canada’s mortgage system. These reforms include increasing the CMHC-insured mortgage cap and extending amortization periods, which could greatly benefit first-time buyers and those seeking homes in high-priced markets.
Key Changes Effective December 15, 2024
1. CMHC Mortgage Cap Raised to $1.5M
The insured mortgage limit is set to rise from $1 million to $1.5 million. This enables buyers to qualify for insured mortgages on homes priced up to $1.5 million with less than a 20% down payment. The change aims to open up access to properties in markets where skyrocketing prices have made it difficult to secure financing under the current $1 million limit.
2. Expansion of 30-Year Amortizations for First-Time Buyers
Previously available only for new builds, the 30-year amortization period will now be available to all first-time homebuyers. This expansion allows borrowers to extend their mortgage payments over a longer period, thereby reducing monthly payment amounts.
What This Means for Buyers
- Greater Purchasing Power: Buyers purchasing homes priced up to $1.5 million can now make a down payment of just 5% on the first $500,000 and 10% on the remainder up to $1.5 million. This opens doors to properties that were previously out of reach under the old cap.
- Lower Monthly Payments: Extending the amortization period from 25 to 30 years results in lower monthly mortgage payments, providing relief for buyers and especially first-time homebuyers.
Example Scenario
For a mortgage of $800,000 at a fixed rate of 4.29%:
- 25-year amortization: Monthly payment = $4,334
- 30-year amortization: Monthly payment = $3,936
Although the longer amortization period results in lower payments, it’s important to note that the total interest paid over the life of the loan will be higher.
Additional Benefits: Potential for Lower Rates
CMHC-insured mortgages tend to offer lower interest rates because they are backstopped by the government. Insured mortgage rates are typically around 0.50% lower than uninsured rates, which can result in significant savings over time.
Impact on High-Priced Markets
These changes are particularly beneficial for buyers in expensive markets such as Toronto, Vancouver, and Calgary, where property prices often exceed the current $1 million cap. By increasing the insured mortgage limit and expanding amortization options, the government hopes to make homeownership more attainable for a wider range of Canadians.
Next Steps
While the full details of these changes will be rolled out in the coming weeks, homebuyers can already start planning for these significant shifts. To learn more about what Calgary’s bustling real estate market has to offer, contact the Top Calgary Real Estate Team today!
Justin Warthe
Team Lead
403-620-8746
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