High-Ratio Mortgage Updates: Get Ready for New Opportunities
On December 15, 2024, important changes to Canada’s mortgage rules will take effect, impacting high-ratio mortgages. This update comes at a time when interest rates have recently seen a reduction, providing further opportunities for homebuyers. The Bank of Canada’s decision to lower the policy rate has created a more favourable environment for potential buyers, signalling a shift in market conditions. This reduction, combined with the new mortgage rules, presents a significant opportunity for those looking to purchase homes in the near future.
Under the new rules, the maximum mortgage cap will rise from $1 million to $1.5 million, providing buyers with more flexibility and options for higher-priced homes. This means more products will be available for clients in the market for homes that exceed the previous $1 million cap. Additionally, the amortization period will be extended from 25 years to 30 years. This change makes monthly payments more affordable, allowing first-time buyers or those looking to move into a higher-priced home to manage their finances better.
For buyers, these changes are excellent news. To qualify as a first-time homebuyer, you need to meet certain criteria, such as not having owned a home in the past four years or having experienced a marital breakdown. A simple example of how the new rules affect a potential buyer: If you purchase a $1.5 million home, your down payment will be $125,000. This includes 5% on the first $500,000 ($25,000) and 10% on the remaining $1 million ($100,000).
These updates are designed to make homeownership more accessible, particularly for those who may have been restricted by the previous cap and amortization limits. With the additional flexibility, it’s a great time to consider entering the housing market.
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