It’s no secret that buying a house in Canada is expense. We have a housing crisis on our hands, and in addition to the excellent First Home Savings Account (FHSA), the government recently (as of a week ago) implemented some changes to mortgage rules to help make homeownership more accessible. Here’s a breakdown of what that means for you.

Lower Down Payments on Some Insured Mortgages

One of the biggest changes that come into effect last week is that the cap on insured mortgages was raised from $1 million to $1.5 million. This adjustment enables buyers in expensive markets, such as Toronto and Vancouver, to qualify for high-ratio mortgage insurance with a smaller down payment.

The down payment requirements are pretty much the same: 5% on the first $500,000 of the purchase price and 10% on the portion between $500,000 and $1.5 million. What this means is that purchasing a $1.5 million home now requires just a $125,000 down payment; way less than the $300,000 it would have taken you before.

Of course, you still need to be able to afford that massive mortgage… but that brings me to the next point!

Expanded 30-Year Mortgage Amortizations

Previously, 30-year amortizations were only available to uninsured mortgages (where you put 20% or more down) and first-time buyers of new builds. Now all first-time homebuyers have access to 30-year terms, which can help to lower your monthly mortgage payments. Similarly, anyone buying a new build using a high-ratio mortgage (including non-first-time buyers) can go with a 30-year term.

That’s great, but consider yourself warned: all other things equal, a longer amortization means that you’ll pay more in interest over the lifetime of your mortgage. While this may be a fair price to pay for some, it’s important to go in eyes wide open. The longer term can add tens of thousands of dollars in incremental interest over its lifetime.

Easier Mortgage Lender Switching

This is another huge one for all the existing homeowner out there.

If you’ve already got a mortgage and are looking to renew, you no longer need to pass the stress test to do so. This increases competition among lenders, which is ultimately good for Canadians.  Before, you were kind of locked in when it came time to renew; either you had to demonstrate that you could afford WAY more than what you were currently paying, or you were stuck with whatever terms your existing lender was offering you for your renewal. Not anymore!

Wrapping it Up

The mortgage changes introduced last week are a step in the right direction. Will they solve Canada’s housing crisis?

…no, they won’t. We need a lot more housing available to Canadians in order to achieve that.

But, it’s gets us a step down that path – especially the waiving of the stress test for renewing Canadians. Ultimately, the changes will make owning a home possible for some folks that were sitting on the sidelines up until now (especially in expensive markets), and that’s good news.