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The federal budget released Thursday, Nov. 5, includes proposals that could give some homebuyers more mortgage options and make it easier for borrowers to compare offers.
If you’re buying a home or coming up for renewal, here are three questions worth asking.
Could I have more lenders to choose from?
Say you’re buying a $1.2-million home with $240,000 down. Even when you put 20% down, some lenders use mortgage default insurance to help fund the loan, and offer better rates and options because of it. At $1.2 million, the purchase price is above the current $1-million cap for this type of insurance, so there may be less competitive options as a result.
Now Ottawa is proposing raising the cap to $1.5 million, which could mean more lenders will be competing for your mortgage. The budget gives no start date, so if you’re house hunting now, ask your broker what financing is available at your price point today.
Would a longer amortization work for me?
Ottawa also proposes allowing up to 30 years to repay these optionally insured mortgages if at least one borrower is a first-time buyer or the home is newly built.
If you have a choice between 25 and 30 years, ask your broker to show you the monthly payment and what you’d still owe at your first renewal. At the same rate, taking 30 years lowers your monthly payment, but you’ll pay down the loan more slowly and could pay more interest over time.
What should I look at when comparing mortgage offers?
Ottawa proposes having the Bank of Canada publish more information on insured mortgage rates to help borrowers compare offers. It also plans to consult on making prepayment penalties clearer for insured mortgages.
It’s incredibly important when comparing offers, to ask what you’d pay if you sold or refinanced before the term ends. If you might move, find out whether you could take the mortgage with you and what conditions would apply.
Other changes to watch
New triplexes and fourplexes: If you’re buying a newly built triplex or fourplex, you could have more financing options even if you plan to rent out all the units. The new rules apply to mortgage insurance applications lenders submit for default insurance on or after Feb. 1, 2027.
Income verification: Ottawa proposes a pilot that would let participating mortgage lenders and insurers verify your income through the Canada Revenue Agency, which ultimately helps reduce fraud and helps overall affordability. For now, your broker will ask you for documents to verify your income and other parts of your application.
Foreign-buyer ban: Ottawa proposes extending the federal ban on foreign purchases of existing homes to Jan. 1, 2029, while exempting newly built homes. If the ban affects your plans, the final rules will determine which new builds qualify.
All these changes ultimately are increasing options for Canadians which should make the dream of home ownership more realistic for some and more flexible for those already on the property ladder. Let's review your person situation and determine if any of these proposed changes would ultimately benefit you when they come into effect.
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