This year has been full of surprises in the mortgage world. While the market, government, and finance agencies are always making changes, the last six months have been a whirlwind.
Below are the most important updates that could affect both homebuyers and current homeowners. But before we dive in, I just want you to remember that navigating these changes isn’t your job: It’s mine.
Whether you’re a first-time buyer, a current homeowner, or thinking about refinancing, it’s always a good idea to talk to a mortgage broker. I’m here to help make these changes work in your favour, ensuring you have the best possible mortgage for your needs.
First-Time Buyers: 30-Year Amortization on New Builds
The government has introduced a change allowing first-time buyers to extend the amortization period to 30 years when purchasing a new-build home.
Amortization: The number of years your mortgage is paid off if you were to make regular payments of interest + principal. A longer amortization period typically reduces the monthly payment amount.
Usually, a 30-year amortization is only available to those with more than a 20% down payment (uninsured mortgage). However, now, this will apply to those with less than 20% down (insured mortgage), starting December 15, 2024.
Just keep in mind that with this extension comes a premium surcharge of 0.20% of the mortgage amount, set by the Canada Mortgage and Housing Corporation (CMHC).
Expanding on this rule, ALL new homebuyers who want to buy a home can extend an insured mortgage to 30 years. Give me a call if you have questions about fitting under this category.
This won’t start until December 15, 2024 so if you are looking at buying, now is the time to start the process.
First-Time Buyers: Increase in Insured Mortgage Limits
CMHC has also raised the price cap for insured mortgages from $1 million to $1.5 million for first-time buyers. What this means is that, starting in December 2024, buyers with less than a 20% down payment can purchase homes up to $1.5 million.
Buyers require 5% down payment on the first $500,000 and 10% on the remaining amount. Your down payment requirement for a $1.5M home would be:
- 5% on $500,000 = $25,000
- 10% on $1,000,000 = $100,000
- Total = $125,000
This change will likely have more impact in higher-priced markets like Toronto and Vancouver, but it’s still something to be aware of here in Alberta.
First-Time Buyers: Increased RRSP Withdrawal for Down Payments
Since April 2024, first-time buyers can now withdraw up to $60,000 from their RRSP for a down payment, up from the previous $35,000 limit. This provides more flexibility when planning your purchase.
Current Homeowners: Removal of Stress Test for Switching Lenders
Starting November 21, 2024, if you’re a homeowner looking to switch lenders when your uninsured mortgage is up for renewal, the stress test requirement will be removed. This is great news because it simplifies the process of finding a better deal with a different lender.
This is a good change as the stress test requirement has not been required for insured switches since October of last year (2023)
Stress Test: A rate set higher than your mortgage contract rate to “test” your ability to pay back your mortgage if rates increase or your income drops. It’s meant to act as a safety so you don’t buy more than you can afford. The higher of a rate of 5.25% OR your actual contract rate plus 2.0% is used to qualify your mortgage loan amount.
This rule applies to:
- You are coming up for renewal of your mortgage term.
- You have an uninsured mortgage.
- You want to do a “straight switch” meaning you will keep the same amortization schedule and current loan amount.
Now, if you’re simply renewing or switching, the stress test hurdle is gone, making it easier to shop around.
Current Homeowners: Refinancing for Secondary Suites
Homeowners with an insured mortgage will soon be able to refinance their properties (up to 90% of the improved value) for building secondary suites. This is meant to boost housing supply and maybe even earn you some rental income.
Reminder: Insured mortgages have less than 20% down and require mortgage default insurance with CMHC.
The property value is capped at $2M and the new mortgage can also be extended to 30-years.
This rule applies only to those who wish to build secondary suites AND who currently have an insured mortgage.
Current Homeowners: Capital Gains Tax on Second Homes
As of June 25, 2024 the capital gains tax inclusion rate increases from 50% to 67% when selling second homes, vacation homes or tax investments.
This new rate only applies to capital gains above $250,000 per owner on title. Any gains below that threshold are treated as before at 50% taxable.
Changes for Alberta Homebuyers: Increased Closing Costs
An increase in land transfer registration fees is among several changes introduced in Alberta’s 2024 budget this spring.
Starting October 21, these fees will more than double—so if you’re planning a home purchase, be prepared to see this reflected in your closing costs.
Mortgage Registration Fee:
- Old: $50 + (principal value/5000) x 1.5
- New: $50 + (principal value/5000) x 5
Mortgage Registration Fee: A charge by the provincial government to officially register a mortgage on a property. This ensures that the mortgage is legally documented and recognized as a lien against the property.
Transfer of Land Registration Fee:
- Old: $50 + (property value/5000) x 2
- New: $50 + (property value/5000) x 5
Land Registration Fee: A charge paid to the provincial government when ownership is officially transferred from buyer to seller. This is part of the legal process that ensures the buyer’s ownership is legally documented.
On a $500,000 property, with a $400,000 mortgage, what cost $420 in registration fees will now cost $1,000.
On a $1M property, with a $800,000 mortgage, what cost $740 in registration fees will now cost $1,900.
Even with these increases, Alberta’s title transfer costs are still lower than most other provinces
Why Work With a Mortgage Broker?
Starting in 2025, banks will face new restrictions, capping the number of uninsured mortgages they can approve above 4.5 times a borrower’s income. This means it might become harder to qualify for a mortgage through a traditional lender.
As a mortgage broker, I have access to a wide range of lenders who specialize in mortgages and don’t face the same restrictions. This means I can often find you better terms and more flexibility.
Give me a call if you have questions about if any of these changes apply to you and your home ownership journey.