Some major updates are coming to Canadian mortgage rules. Whether you're a first-time homebuyer or have purchased before, these changes will offer more flexibility and make it easier to enter the housing market. But my question for you to think about is do we want housing easier to obtain or do we want more affordable housing?
Before diving into the specifics, let’s take a quick look at Kelowna’s real estate market to put these changes into perspective.
As of now, the average sale price for single-family homes in Kelowna is sitting at $1,109,000, which just seeing that number its no wonder we are talking about unaffordability. This year alone, we’ve seen 759 sales over $1 million. In comparison, there have been 2,671 total sales for properties under $1 million, including everything from lots to mobile homes. So, roughly one-third of sales in the entire market could be directly impacted by these upcoming changes.
Coming December 15th, 2024
1. Higher Price Limit for Insured Mortgages
The government is raising the price limit for insured mortgages from $1 million to $1.5 million. This is great news for those of you looking to purchase a home without a full 20% down payment.
Who this likely will impact the most: Those feeling priced out of the market, or not finding the right home in their current budget. There is a con however, the additional insurance amount will be added to the mortgage.
2. Lower Down Payments
For homes priced up to $1.5 million, the required down payments will be more manageable. Here’s what you need:
5% down on the first $500,000 of the purchase price
10% down on anything above $500,000
This lower down payment requirement means you won’t need as much saved upfront, making it easier to get into the market sooner. That being said the mortgage insurance will come into play for anything with less than 20% down(see above).
Who this likely will impact the most: This can help out the move up buyers who maybe don’t have quite enough equity in their home to afford the full down payment but life situation is pushing them to need to get to a larger, presumably more expensive home.
3. Longer Amortization Periods – What Does This Mean for You?
The new rules are also introducing longer amortization periods for certain buyers, which can significantly reduce your monthly payments.
First-time buyers: You’ll now have up to 30 years to pay off your mortgage, whether you’re buying a brand-new home or a resale. This longer period lowers your monthly payments, making homeownership more affordable.
For non-first-time buyers: If you're purchasing a resale home, the maximum amortization period will remain at 25 years. However, if you opt for a new build, you can take advantage of the 30-year payment plan, giving you lower monthly payments and more financial flexibility.
Coming January 15th, 2025
4.Access Up to 90% of Your Home’s Value
With this new rule, you’ll be able to refinance your mortgage and borrow up to 90% of your home’s value—including the value that a secondary suite adds to your property. This means you can use the equity in your home to cover the cost of building that secondary suite without needing a separate loan. Plus, you’ll have the option to stretch out your payments with a 30-year amortization period, making the monthly payments more manageable.
If you’ve been thinking about building a rental suite to generate extra income or create space for family members, this could be the perfect opportunity to make it happen.
5. Higher Price Limit for Refinancing
The government is also increasing the mortgage insurance price limit for refinancing to $2 million for homes with secondary suites. This ensures that homeowners in all markets, including higher-priced areas, can take advantage of this refinancing option. No matter where you’re located, this higher limit gives you the flexibility to make the improvements you need without worrying about market constraints.
Do These New Measures Really Address the Right Problem?
At first glance, these changes seem like a great way to help more people get into homes. However is this the housing industries form of “safe injection sites”? Will they help with affordability or just enable people to spend more than what they can afford? The design of these programs is making it easier for the general population to qualify for a mortgage and purchase a property that otherwise might be out of reach. Which sounds like a step in the right direction. But here’s the question I think we should be asking: Do we want to make homes more attainable, or do we want to make homes more affordable?
In my opinion, it’s one or the other, and these new measures might drive up home values instead of solving the affordability issue. Don’t get me wrong—helping more people buy homes is important, and that should definitely be the goal. But these changes don’t seem to address the real issue in the market: the lack of supply.
Don’t get me wrong, as long as you can afford the payments take advantage of these programs, otherwise you might get left behind. My concern is for the people that maybe take on more risk than what they can afford to lose.
Other than encouraging the addition of secondary suites, these measures are likely to increase demand for housing, without doing anything to boost the supply. And when demand rises without more homes being built, prices go up. So, my concern is, are we putting the cart before the horse here? Are we just enabling people to take on more debt than they can truly afford?
Personally, I think we need stronger measures that focus on increasing the supply of homes. Until we tackle that, I’m not sure we’ll see real improvement in housing affordability.
Hope you have a great week!
Mark and Maddie Coons
778-744-0872
250-801-0361
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