New Mortgage Insurance Reforms: Let’s Clear the Confusion
Starting December 15, 2024, the Canadian government is making big changes to mortgage rules. These changes are meant to help more people buy homes by giving them more flexible payment options and increasing the price limits for insured mortgages.There has been some confusion around these reforms, the biggest misnomer being that they are only for First Time Buyers. In fact, these changes do not apply only to first-time buyers; they apply to anyone who qualifies for an insured mortgage, with one exception regarding amortization on resale homes.Let’s break down these new rules in simple terms and review some examples.Key ChangesHigher Price Limit for Insured MortgagesCurrently, insured mortgages are only available for homes priced up to $1 million. Starting on December 15th, 2024, this limit will increase to $1.5 million. This means more people can buy homes with less than 20% down.Minimum Down PaymentsFor homes priced up to $1.5 million, you will need:5% down on the first $500,00010% down on the remaining amount above $500,00030-Year Amortization for First-Time Buyers on BOTH New Build AND ResaleIf you’re a first-time homebuyer, you can now spread your mortgage payments over 30 years on either New or Resale homes.25-Year Max Amortization for NON-First time Home Buyers on Resale HomesThis is the key difference where NON-first timers are treated differently. While 30-year amortization is available on new builds for non-first-timers, resale homes will only have a maximum 25-year amortization.Example 1: First-Time Buyer Purchasing a Home (Resale or New Build)Let’s take Finn and Farrah; first-time homebuyers looking to purchase a home priced at $1.2 million. Whether they buy a resale home (a home that’s been lived in before) or a new build (a brand-new home), they can now get a 30-year amortization. This will reduce their monthly payments compared to the standard 25 years. Here’s how the numbers work for these first-timers:(*For all the examples here, we will use a 4.5% interest rate compounded semi-annually)Down payment:5% on the first $500,000 = $25,00010% on the remaining $700,000 = $70,000Total down payment = $95,000Loan amount: $1,105,000 (before adding mortgage insurance)Mortgage insurance premium: 4% of loan amount = $44,200New loan amount with insurance: $1,149,200Monthly Payments25-year amortization: $6,360.5130-year amortization: $5,794.45Finn & Farrah would save about $566.06 per month by choosing the 30-year amortization.Example 2: A Couple Selling and Buying a Resale Home (NOT First-Timers)Rob and Rachel are selling their current home worth $900,000 and are looking to buy a resale home priced at $1.3 million. They will not have 20% down, but with the new rules, they can get an insured mortgage with a smaller down payment.One key difference for this couple is that, although they qualify for a smaller down payment, they cannot access the 30-year amortization on this resale purchase. If they want a 30-year amortization, they would need to buy a new build (see example 3 below).Down payment:5% on the first $500,000 = $25,00010% on the remaining $800,000 = $80,000Total down payment = $105,000Loan amount: $1,195,000 (before adding mortgage insurance)Mortgage insurance premium: 4% of loan amount = $47,800New loan amount with insurance: $1,242,800Monthly Payments:25-year amortization: $6,878.56Since this is a resale home and they are not first-time buyers, the 30-year amortization is not available.Example 3: A Couple Selling and Buying a New BuildNow, let’s take the same NON-first-timer couple, Rob & Rachel, but this time they are buying a new build for $1.3 million. Since they are purchasing a new construction, they qualify for the 30-year amortization, even though they are not first-time buyers.The loan details will remain the same as the above Example 2, except for the available amortizationMonthly Payments:25-year amortization: $6,878.5630-year amortization: $6,266.39The couple would save about $612.17 per month by opting for a 30-year amortization on the new build.Here’s a summary of the new rules and how they apply to different types of buyers:These new reforms aim to make homeownership more accessible for Canadians by offering more flexible payment options and increasing the price cap for insured mortgages. However, it’s important to remember that while longer amortizations reduce monthly payments, they also mean paying more interest over time. If you have questions about how these changes might affect you, speak with a mortgage professional to find the best plan for your situation.
Toronto’s September Real Estate Market Overview: Sales, Inventory, and Rents
The Toronto real estate market continues to send mixed signals, with sales and inventory levels shifting in different directions. Sales TrendsIn August, seasonally adjusted home sales in Toronto rose slightly by 0.6% month-over-month (m/m) according to Edge Realty’s September Metro Deep Dive. This was accompanied by a revised upward figure for July. However, year-over-year (y/y) sales were down 6% overall, with the condo segment in the city seeing a sharper decline of 15% y/y. Both the condo and single-family segments had the lowest sales numbers for any August in the past 25 years.Source: Edge Realty AnalyticsNew Listings and Inventory LevelsAlthough there were some expectations for a rise in new listings, seasonally adjusted listings were down 1.6% in August. This continues a trend of lower-than-usual listings over the past 18 months. Active inventory across the Greater Toronto Area (GTA) remains elevated, increasing by 46% y/y and reaching its highest levels since 2008, per the Edge Realty report. Condo inventory, in particular, remains at record highs, adding pressure on market conditions.The sales-to-new listings ratio remains below 40%, a level historically associated with price declines. Additionally, the months of inventory for condos are at record highs, while single-family homes are at their highest since 2008. Source: Edge Realty AnalyticsSource: Edge Realty AnalyticsMarket Balance and Price TrendsDespite sales-to-new listings and months of industry numbers, prices have remained stable. The MLS Home Price Index (HPI) remained flat in August, as prices remained effectively unchanged for the past four months. This contrasts with expectations of price declines based on high inventory levels, creating a potential area of future concern. However, Ben Rabidoux, Edge Realty, predicts that without a market tightening before winter, prices could start to decline.Rental Market and Investor Cash FlowIn August 2023, Toronto’s rental market continued its trend of increasing rental prices. The average rent for a one-bedroom unit climbed by 1.4% from the previous month, reaching $2,620, while two-bedroom units saw a 2.4% increase, with average rents hitting $3,413. This positions Toronto as the second most expensive city in Canada for renters, just behind Vancouver. However, the condo rental market remains under pressure, as the Edge Realy report noted rents dropping 7% y/y in August. This decline is partly attributed to high levels of condo completions. However, cash flow fundamentals for investors have improved somewhat. Falling prices and declining mortgage rates have reduced the monthly cash flow burn rate by more than half compared to late 2023, although it is still negative at this point. Rabidoux anticipates that investors may return by early next year, but only if mortgage rates continue to decline. Source: Edge Realty AnalyticsConstruction ActivityRental construction surged in July, resulting in a 1.1% increase in total dwellings under construction in the GTA, largely driven by a 5.5% rise in rental construction. There are 103,000 total dwellings in the construction pipeline, with 73,000 condos and 19,000 rental units under development. However, single-family housing starts remain low, with only 11,000 units in construction. July’s condo sales were notably weak, down 67% y/y, and this will likely lead to fewer condo starts in the coming year, potentially exacerbating future supply shortages, according to the Edge Realty report.Source: Edge Realty AnalyticsEmployment and Market OutlookThe economic backdrop has also been challenging. The unemployment rate in the GTA increased to 8.8% in August, the highest level outside of the pandemic since 2012, and higher than Canada’s unemployment rate overall of 6.6%Looking ahead, the Toronto Regional Real Estate Board (TRREB) expects that lower borrowing costs over the next year and a half will help home buyers by reducing both mortgage payments and home prices. Despite anticipated demand increases in 2025, ample inventory is expected to keep price growth moderate during the initial recovery.
Canadian homeowners 75+ more financially stable, well-connected & purpose-driven than 50-somethings
A survey commissioned by HomeEquity Bank shows 95 per cent of Canadian homeowners aged 75 and older are very satisfied or somewhat satisfied with their lives, compared to just 79 per cent of Canadians in their 50s. Study’s happiness markers: Financial stability, quality connections & sense of purpose “Our latest study unpacks different happiness markers for Canadians and how they shift as they age. We found a sharp distinction between those approaching retirement and those well into it,” says Katherine Dudtschak, president and CEO of HomeEquity Bank. The happiness markers used in the study include financial stability, quality connections and sense of purpose. “To be fulfilled, you need to look at all facets of your life,” says Vivianne Gauci, HomeEquity Bank’s senior vice president of customer experience. “Financial stability is a fundamental part of living a healthy and fulfilling life, but it’s not the only factor. Connections and purpose have critical roles to play, which is why enjoying a happy retirement requires a holistic approach.” Here are the study results. Financial stability 48 per cent of Canadians in their 50s feel very good or excellent about their finances, while 68 per cent of those aged 75 and older feel the same. Likewise, more Canadians in the older age bracket (75 per cent) vs the younger age bracket (55 per cent) felt they could handle a major unexpected expense. Quality connections The study found that feeling connected and experiencing good friendships improves as people age from their 50s to 75+ (70 per cent versus 85 per cent). As well, another indicator of connection, living in homes in good order and enjoyed by family members, improves with age (81 per cent versus 89 per cent). Sense of purpose Being active in their communities is more common for those aged 75 and up (48 per cent) than those in their 50s (30 per cent). Likewise, giving back to the community and supporting charitable causes increases with age (34 per cent versus 51 per cent). Biggest stressors For homeowners in their 50s, the biggest stressors include outliving retirement savings, not having enough to support themselves and the ability to leave behind a legacy they can be proud of. This is exacerbated by a changing retirement landscape, which includes Canadians aging with more debt, limited cash savings and shrinking pensions, while living longer with increasing and different health care needs. Review the full report here.
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