What does the new 30-year amortization option mean for you?

First-time home buyer trying to enter the market? The federal government has made some exciting announcements recently that could help you break into the housing space! These changes mainly revolve around extended amortization options. Here’s what you need to know.

The 30-year amortization

Starting on December 15, first-time home buyers can benefit from a 30-year amortization option. This is a five-year increase to the current maximum amount of 25 years. The length of your amortization determines the amount of time you take to pay off your mortgage. Longer amortization periods will have smaller monthly payments, but higher overall interest costs. Shorter amortization schedules are the opposite, with larger payments, but lower interest expenses in the long run.

A 30-year amortization will allow first-time buyers to access more financial breathing room with their monthly payments. They can spread out their payments over those extra five years, which will help lower short-term costs. Mortgage payments are a big barrier to people trying to enter the market, so this aims to open up access to more Canadians. These changes can also help Canadians qualify for a larger mortgage amount, since they will have more time to pay off the amount they borrow. The 30-year amortization option will be available for first-time buyers purchasing a new or resale home, and all buyers who take on new construction builds.

Increases to the insured mortgage cap

The other major change is an increase to the insured mortgage cap. Right now, any home that costs more than $1 million requires a 20 per cent down payment. This means certain home buyers don’t have the option to access mortgage default insurance, which is only available for smaller down payments. Insured mortgages tend to have lower interest rates, which is beneficial for the buyer.

In December, this limit will increase to $1.5 million. Since many homes in major markets are over $1 million, fewer buyers are able to access an insured mortgage. This increase opens up the number of buyers who can enter the market with a smaller down payment and take advantage of this insurance.

Contact your mortgage broker!

These changes are exciting and will open up the doors for many new home buyers in Canada. However, the best way to ensure you are choosing the right path is to work with a mortgage broker! We have experience working in all kinds of market conditions, and dealing with changes to mortgage rules and regulations. These are two major updates that will likely have a big impact on the market in the coming months and years. Be sure to have someone on your team who can help you navigate these changes and guide you through the process.

As brokers, our goal is to get you into the right home, with the right lender and the right product. These changes may have an impact on your future options, and the actions we recommend taking. It’s important to work with someone who can see the bigger picture, and help you navigate the market with ease.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.