Last year saw a series of substantial changes to Canadian mortgages rules. We’ve provided a quick summary of the larger movements below:
Launched the Tax-Free First Home Savings Account, which allows Canadians to contribute up to $8,000 per year, and up to a lifetime limit of $40,000, towards their first downpayment. Tax-free in; tax-free out.
Enhanced the Home Buyers’ Plan limit from $35,000 to $60,000, in Budget 2024, to enable first-time homebuyers to use the tax benefits of Registered Retirement Savings Plan (RRSP) contributions to save up to $25,000 more for their downpayment. The Home Buyers’ Plan enables Canadians to withdraw from their RRSP to buy or build a home and can be combined with savings through the Tax-Free First Home Savings Account.
Mortgage stress test changes, since 2018, Canadian homebuyers have been regulated by a mortgage stress that determines whether the borrower can handle a potential increase in their mortgage interest rate. To pass the test, purchasers must prove they can afford a mortgage at a qualifying rate higher than what their lender has approved.
Under new guidelines, if a homeowner with an uninsured mortgage is switching to a new lender and keeping the same amortization and loan amounts, the new lender won’t be required to apply a new stress test. This is also known as a straight switch.
Increasing the $1 million price cap for insured mortgages to $1.5 million, effective December 15, 2024, to reflect current housing market realities and help more Canadians qualify for a mortgage with a downpayment below 20 per cent. Increasing the insured-mortgage cap—which has not been adjusted since 2012—to $1.5 million will help more Canadians buy a home.
Expanding eligibility for 30 year mortgage amortizations to all first-time homebuyers and to all buyers of new builds, effective December 15, 2024, to reduce the cost of monthly mortgage payments and help more Canadians buy a home. By helping Canadians buy new builds, including condos, the government is announcing yet another measure to incentivize more new housing construction and tackle the housing shortage. This builds on the Budget 2024 commitment, which came into effect on August 1, 2024, permitting 30 year mortgage amortizations for first-time homebuyers purchasing new builds, including condos.
A First Time Homebuyer is defined by meeting one of the following criteria: The borrower has never purchased a home before; OR In the last 4 years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned; OR The borrower recently experienced the breakdown of a marriage or common-law partnership.
Canada’s Prime rate dropped from 7.20% to 5.45% heading into 2025 | 