Real Estate Updates You Might Have Missed

Spring lending season is approaching in the GTA, and many may have missed key real estate updates from late 2024. Here are 4 of the big changes that will affect many home buyers, specifically first time buyers (FTB):

1. The cap for insured mortgages rose to $1.5 million (up from $1 million).
2. First-time buyers can now get a 30-year amortization on new builds (previously 25 years).
3. Insured mortgages can switch lenders at renewal without a new stress test.
4. The Home Buyers' Plan limit increased from $35,000 to $60,000, along with First Home Savings Account changes.

Let’s break down each:

The insured mortgage cap has increased to $1.5 million (up from $1 million).

Mortgage insurance rules have changed to better reflect home prices, making it easier to buy with less than 20% down:

Previously:

• 5% down was required for the first $500,000.
• 10% was required for amounts between $500,001 and $999,999.
• Homes over $1 million required 20% down with no mortgage insurance.

Now:

• 5% is required for the first $500,000.
• 10% is required up to $1,499,999.
• Homes over $1.5 million require 20% down with no mortgage insurance.

With GTA home prices averaging $1.38M for detached, $1.04M for semis, $984K for freehold towns, and $671K for condos, raising the cap benefits first-time buyers. For example, on a $1.1M home, the required down payment drops from $220K to $110K—significantly easing the financial burden, often reducing reliance on parental support.

First-time buyers can now get a 30-year amortization on new builds (previously 25 years).

Extending amortization by five years improves cash flow for FTBs who choose pre-construction over resale. On a $750,000 mortgage at 4.25% interest, the difference is clear:

• 25-year amortization: $4,047/month
• 30-year amortization: $3,673/month

That $400/month savings is significant. Since many FTB opt for condos, they also benefit from lower maintenance, fewer repairs, and reduced utility costs—though condo fees exist, they cover most upkeep, easing the transition into homeownership.

A similarly priced freehold home in the GTA often requires repairs and updates, whereas a new build should be hassle-free for years.

This policy likely aims to boost demand for new builds, spurring construction, creating jobs, and gradually easing Canada’s housing shortage.

Insured Mortgages Can Switch Lenders at Renewal Without a Stress Test

Previously, homeowners with insured mortgages had to requalify via a stress test when switching lenders at renewal—intended to reduce default risk. However, data showed this wasn’t a real issue and instead limited homeowners’ ability to find better terms. Many were stuck with their current lender despite better options elsewhere.

This change fixes that, allowing all homeowners to shop for the best terms, whether they prioritize pre-payment flexibility, lower rates, or adding a HELOC. Many features unavailable during a first term become viable later, and removing the stress test ensures homeowners can take full advantage.

Home Buyers’ Plan (HBP) Limit Increased from $35,000 to $60,000

This is a major improvement, as many FTB previously ignored the HBP since it wasn’t enough to make an impact.

For a $1,000,000 home, an FTB needs nearly $150,000 upfront:

• $75,000 – Down payment (5% on first $500K, 10% on the rest)
• $37,000 – Mortgage insurance
• $32,950 – Land transfer tax (half if outside Toronto)
• $3,000 – Legal fees, inspections, moving costs, etc.

The old $35K limit didn’t even cover mortgage insurance, making it less useful. With the increase, saving through the RRSP HBP and FHSA can now provide $100K+ toward a first home, especially with investing.

First Home Savings Account (FHSA)

Similar to a TFSA, the FHSA is a tax-free account for first-time buyers to save and invest for a home. Gains in the account are not taxed.

• FTBs can contribute $8,000/year, with a $40,000 lifetime limit.
• Up to $8,000 can be carried forward.

By maximizing both the FHSA and RRSP HBP, an FTB can build $100,000+ toward their first home—possibly more through smart investing.

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