Key Takeaways
- 30-year amortization are available for First Time Buyers and for All Buyers of New Builds!
- High-ratio mortgage insurance limit increased to $1.5M from the previous $1M
-Homeowners can refinance their homes when adding a secondary suite (such as basement suite, or over-garage apartment).
- Combined, these are some of the most impactful affordability measures introduced to buyers in decades.
1. 30-Year Amortization for First-Time Buyers
First time home buyers are now eligible for 30-year amortizations!
A “first time” home buyer must meet at least one of the following criteria:
Someone who has never purchased a home
Anyone who hasn’t owned a home (including their current spouse) for the past 4 years.
Those recently separated from a marriage or common-law partnership.
2. 30-Year Amortizations for All Buyers of New Builds
New builds now qualify for 30-year amortizations for all buyers – no first-time buyer restriction! To be considered for a new build home, the new home must have been previously occupied for residential purposes.
Even if you’re eligible for a 30-year mortgage, it’s crucial to understand both the benefits and drawbacks of these loans.
Pros and Cons of a 30-year Mortgage
Pros
Lower monthly payments. By stretching your mortgage out an extra five years, your monthly payment will decrease. By extending the repayment period 5 more years, your mortgage balance is divided into smaller portions, making your monthly obligations more manageable.
Flexibility. With reduced monthly payments, you can free up cash flow to invest in other areas, such as retirement savings, education funds, or paying down high-interest debt.
Improved affordability. Lower monthly payments may enable buyers to qualify for a larger mortgage, allowing them to purchase a more expensive home or compete in hot housing markets. This flexibility can be especially beneficial for first-time homebuyers or those upgrading to a larger property.
Cons
Paying more in interest. A 30-year mortgage involves more time for you to be charged interest. The interest rate you’re charged will likely be higher than for a mortgage with an amortization of 25 years or less, too.
More debt for longer. Three decades is a long time to pay back a loan, especially if it takes you close to retirement. If you’re still plugging away at a 30-year mortgage when you’re 64, for example, it might mean putting less into your RRSP or TFSA than you’re comfortable with.
3. High-Ratio Mortgage Insurance Limit Increased to $1.5M
Buyers can now qualify for a mortgage with less than a 20% down payment on homes priced up to $1.5M, making it easier to access higher-priced properties. This move aims to help buyers in higher-priced markets where skyrocketing housing costs have made it nearly impossible for many to qualify for insured mortgages under the previous $1M cap.
While this is especially relevant in markets like Toronto and Vancouver, it could be an option for those who are thinking of purchasing a little higher in cities like Edmonton, Sherwood Park, St. Albert and more.
4. Secondary Suite Refinance Program
Effective January 15, 2025, Homeowners have the chance to refinance up to 90% of their property’s value (capped at $2M) to add up to four rental units – such as basement suites, in-law suites, or above garage apartments.
The borrower must meet all the following requirements:
Borrower must already own the home
The borrower or a close relative are occupying one of the current units
Intend to construct additional units
The additional unit(s) must not be used as a short-term rental.
30-year amortization is allowed.
New rental suites would provide more homes for Canadians and could provide an important source of income for seniors continuing to age at home. We expect this program to be very popular as clients look to offset mortgage costs with rental income.
Closing Thoughts
As we step into 2025, these mortgage updates present exciting opportunities and considerations for buyers, homeowners, and investors alike. Whether you’re a first-time homebuyer, planning to build your dream home, or exploring refinancing options, staying informed is key to making the best financial decisions. If you have questions about how these changes might affect your plans, or if you’re ready to buy, sell, or invest in real estate, reach out to us today. Let’s navigate this evolving market together and make your real estate goals a reality!
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Whether you’re buying, selling, or exploring property management services, we’re her to help. At Realty Focus, we pride ourselves on providing exceptional service tailored to you unique needs. Serving Edmonton, Sherwood Park, St. Albert, Fort Saskatchewan and Beyond!
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Jeff & Sandy Johnson