Major mortgage reforms aim to make homeownership more affordable

I’m excited to bring you the latest edition of my blog, packed with important updates and tips to help you stay informed and empowered in your homeownership journey! This month, I’m covering some significant changes in the mortgage landscape that could directly impact your plans, whether you’re buying, considering a move, or gearing up for a mortgage renewal. These major mortgage reforms aim to make homeownership more affordable.

Borrowers switching lenders at renewal will not need to complete the Stress Test: Canada’s banking regulator, the Office of the Superintendent of Financial Institutions, or OSFI, is poised to ease mortgage rules for homeowners looking to switch lenders during mortgage renewal. Effective November 21, borrowers renewing with a different lender will no longer need to complete the mortgage stress test, simplifying the process for those with uninsured mortgages. In the past, even a straightforward renewal switch required borrowers to demonstrate their ability to manage payments at a rate 2% higher than the new mortgage contract rate. This posed significant challenges as rates climbed to 6%, bringing the stress test rate to 8%. While insured mortgages were already exempt from this requirement, uninsured borrowers will now receive similar treatment.

Higher Insured-Mortgage Cap: Starting December 15, 2024, the insured mortgage cap will increase from $1 million to $1.5 million—the first adjustment since 2012! This update aligns better with today’s housing market, allowing more Canadians to qualify for a mortgage with less than a 20% down payment.

Before December 15, 2024:

If you purchased a home valued at $1,500,000

The minimum down payment required is $300,000 or 20%.

After December 15, 2024:

If you purchase a home valued at $1,500,000.

The minimum downpayment required is $125,000 or 10.42%

The intent is to make homeownership more affordable while decreasing the required down payment.

Extended 30-Year Amortization: Also coming into effect on December 15, 2024, first-time homebuyers and new-build purchasers will be eligible for 30-year mortgage amortizations (previously capped at 25 years) on insured mortgages. The longer amortization period will help make homeownership more affordable by lowering monthly mortgage payments. The change should also encourage new home construction to help ease the housing shortage.

These reforms build on earlier initiatives from 2024, including:

RRSP Home Buyer’s Plan: The limit was raised from $35,000 to $60,000, offering Canadians more flexibility in using their savings for a home.

Permanent Amortization Relief: It allows eligible homeowners facing financial hardship to extend their mortgage amortization periods, reducing their monthly payments to more manageable levels. This measure aims to help homeowners maintain their financial stability and retain ownership of their homes during challenging times. This initiative provides long-term support for homeowners facing rising mortgage payments. I will keep you informed as more details are announced, but these updates are designed to create new pathways to homeownership.

Whether you're considering a move or nearing mortgage renewal, now is the perfect time to explore your options!

Let’s discuss how these reforms could benefit you. Please feel free to contact me for a free, no-obligation consultation.

Please let me know what your thoughts are. Will these measures make housing more affordable? Please feel free to share your comments.