BIG Insured Mortgage Rule Changes

Canada just came out with three new insurance rule changes. These rule changes all help buyers with affordability (higher purchase prices).

All of these changes are in play as of December 15th. Mortgage application submissions for any new insurance rules must occur on or after December 15th.

1. Increase $1,000,000 Insured Price Cap to $1,500,000

First, the government has increased the maximum insured purchase price from $1,000,000 to $1,500,000 with less than 20% down.

• The down payment must be 5% on the first $500,000 and 10% from $501,000 to $1,500,000.
• This can be for second homes and primary residences.

This is a very welcome change because it’s very rare for a “livable” property with 3-bedrooms to be under $1M anymore (in Vancouver anyways). This puts a lot more people in play for properties up to $1,500,000, who may not have 20% down.

2. Expand 30 Year Amortization to Insured Mortgages

Second, we’re now able to go up to 30 years amortization for insured first time home buyers (FTHB) and for all buyers of new construction (purchases from a developer).

• There is a .20% premium on insurance costs to change an insured mortgage from 25 years amortization to 30 years amortization.
• FTHB means that in the last 4 years, someone has not occupied a home as a principal residence that either they or their current spouse/common law partner has owned.
• Or, the borrower has recently experienced a breakdown in marriage or common-law partnership, or someone with a qualifying disability.

This new rule will provide for an increase of approximately 7% purchase power.

3. Insured Refinances Up To $2,000,000 to Add 1-3 Additional Rental Units

This is a really interesting one… the insurers are allowing borrowers to refinance (usually not allowed for insured mortgages) their home in an insured mortgage in order to construct at least one additional rental unit in their home or on their property (coach house).

To qualify:

• Borrowers must already own their property.
• The borrower or close relative must occupy the current unit.
• Additional units built must be for long-term rental (no AirBNB).
• Future rental income can be used to support building the rental suite!!
• The “as complete” value of the property must be $2,000,000 or less.

This new insured construction or renovation loan is also interesting because many lenders have a cap on how much they will lend for renovations. It’ll be interesting to see which lenders take up this program in earnest.