Coming Soon – Mortgage Amortization Changes

There have been many (many, many) changes to the housing market at both a provincial and federal level in 2024. A trio of recent changes and market dynamics come together in such a way that provides opportunities to home buyers.

To keep things simple, I’ll review each change separately. This should be helpful to those buyers who have been undecided about the market and looking for situation-specific information.

Today, let’s focus on mortgage amortization changes. As always, I recommend reaching out to a trusted realtor or mortgage broker to discuss your specific situation.

MORTGAGE AMORTIZATION: The basics

Mortgage amortization refers to the amount of time allocated for paying off the entire mortgage. In most cases, this is restricted to a maximum of 25 years. Obviously then, the longer the amortization period, the lower the monthly payments. There are some differences between insured vs uninsured mortgages but the distinctions aren’t important for the current topic points.

30 YEAR MORTGAGE AMORTIZATION: The change

Effective December 15th, the maximum amortization period is extended to 30 years for newly constructed homes and for first-time home buyers. This change has two potential impacts:

1. By extending the amortization period, the income required to qualify for a home purchase decreases. This means more clients can meet the necessary mortgage criteria.
2. Clients will experience a decrease in their monthly payments, making homeownership more financially manageable. (For instance, on a $600,000 purchase, the monthly payment could drop by approximately $240/mth, providing greater flexibility in budgeting).

THE VERDICT

It’s important to note that extending the amortization period means the payer will ultimately pay more for interest costs over the life of the mortgage. It will be important to plan for ways to reduce this expense; For example by accelerating payments or making occasional lump sum payments where the mortgage terms allow).

But the benefit of this change is important to consider when looking at home purchasing options as it will allow buyers who may have previously had limited options to explore more possibilities that previously may have been out of reach.

HAVE QUESTIONS?

If you or someone you know is wondering how this change impacts you, let’s connect.