The federal government has announced two big updates to updates to CMHC eligibility for First-Time Homebuyers. Whether the changes are an effort to garner votes, or increase affordability is up for debate.
THE FIRST UPDATE: INCREASE TO THE MAXIMUM VALUE
Currently, CMHC-eligible insured or insurable mortgages are limited to home values of $1 million. The announced changes will increase this maximum home value to $1.5 million. This means first-time buyers can now potentially qualify for a mortgage when making a down payment on homes priced up to $1.5 million. This will make it easier to come up with a down payment for these more expensive homes.
This change could help certain high-income buyers or those with co-signers in higher-priced markets where skyrocketing house prices have made it difficult to find homes under $1 Million.
The catch to this change is that it will only help a select few high-income households or those that have well-heeled co-signers. To qualify for an insured mortgage for a million-dollar purchase, you would require a household income of at least $200,000.
THE SECOND UPDATE: EXTENSION OF AMORTIZATION TO 30 YEARS
The second announced change is an extension of 30-year amortization mortgages to all first-time homebuyers. This extension adds to the government’s previous announcement earlier this year that allowed 30-year amortizations on newly built homes. The government says this change will ease the financial burden on younger buyers, allowing them to spread payments over a longer period, thus reducing monthly costs.
The change to 30-year amortization should have the effect of helping to increase affordability by lowering payments, and increasing the amount of the mortgage borrowers will be able to qualify for.
While helping out a small group of buyers qualify for larger mortgages, I don’t believe these changes will have any effect on affordability. Instead, it has the potential of increasing demand which could have the unintended consequence of increasing home prices. The only thing that will ease the issue of affordability is increasing the supply of new housing, which the government has been unfortunately slow to address.
The above changes are slated to come into effect on December 15, 2024.
You can click here to read the full official announcement on these updates to CMHC eligibility for first-time homebuyers.
If you have questions about how these new changes can affect your purchasing power, please reach out to me today.