Home buyers are able to purchase a home in Canada with as little as 5% down payment. However, if your down payment is less than 20% of the purchase price, you’ll need mortgage insurance.

Currently, only purchases up to $1 million dollars are eligible for home insurance. This means that if you’re buying a home that’s more than $1 million, you must have at least 20% down payment. Saving a down payment has been a struggle for Canadians over the last few years given increased costs of living and inflation.

The new rule will raise the cap from $1 million to $1.5 million, effectively allowing a home buyer to purchase a property of up to $1.5 million with less than 20% down payment.

Back in August of 2024, the federal government announced 30-year mortgage amortizations for first time home buyers. This meant that only a segment of purchasers would qualify lower monthly payments.

The new rule will allow ALL buyers (not just first time home buyers) of new builds to qualify for a 30-year mortgage amortization.

What does this mean for me?

These rules are meant to stimulate purchases in the real estate market, allowing access to more buyers who may not currently qualify for a mortgage under the current rules.

However, it’s important to note that over the long run, your costs will be higher when you purchase with a lower down payment and choose a 30-year amortization schedule.

Let’s compare the difference between buying a $1,200,000 before and after the rules changes set to take place on December 15, 2024.

Before The Policy Change

• Purchase Price: $1,200,000
• Down Payment Requirement: 20% of the purchase price
• Total Down Payment: $240,000
• Mortgage Amount: $960,000
• Interest Rate: 5% (typical rate for uninsured mortgages)
• Amortization Period: 25 years
• Monthly Payment: $5,586.58

After The Policy Change

• Purchase Price: $1,200,000
• Down Payment Requirement: 5% on the first $500,000
  10% on portion above $500,000
• Total Down Payment: $95,000 ($25,000 + $70,000)
• Mortgage Amount: $1,149,200 (including insurance)
• Interest Rate: 4.8% (lower for insured mortgages)
• Amortization Period: 25 years
• Monthly Payment: $6,027.51

Although the new rules do lower the barrier of entry for home buyers in high priced markets like Toronto by reducing upfront costs, monthly payments will be higher and there will be an increase in total mortgage interest paid over the lifetime of the mortgage.

It’s important to understand how these rules will impact you long term, and we suggest you set up a free, no-obligation buyer consultation meeting with Team Paliwal. Our real estate experts will be happy to explain the costs of purchasing in today’s market.

1. We ALWAYS have a detailed in-person or Video call meeting with every client because we know you have specific needs. We plan a personalized road map and process for your move.
   
2. We aim to reply to every inquiry within 10-30 minutes because we know you want reliable communication with your agent.
   
3. We work hard to stay ranked in the top 50 teams in Canada at REALTOR.CA and  RE/MAX  because we know you want experience and expertise.

RE/MAX Team Paliwal is a small team of highly accomplished real estate agents with more than 40+ years of combined experience in the Greater Golden Horseshoe Area. Our reputation for a thorough process attracts many first-time homebuyers, but we also work with all buyers and sellers aiming to upgrade their homes.

After hundreds of successful deals, we are fortunate to be one of the most trusted and highly reviewed real estate teams online. You can find all real testimonials and reviews of our team on RankMyAgent.com, a verified review platform by the Canadian Real Estate Association, realtor.ca and RE/MAX.CA

Our team has ranked in the top 50 teams in Canada at RankMyAgent.com for the last 3 years, and our team leader Gyanesh Paliwal is the recipient of RE/MAX International’s Hall of Fame Award, Lifetime Achievement Award, and Titan Club Awards.

Picture by Jakub Żerdzicki on Unsplash