30 Year Amortization Now Available on Some Insured Mortgages - Best Mortgage Broker Rates

30 Year Amortization Now Available on Some Insured Mortgages

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When purchasing a property with less than 20% down payment, mortgage default insurance (CMHC for example) is required. The advantage is that you’ll likely receive a lower mortgage rate. Possibly, much lower.

The maximum amortization is limited to 25 years on insured mortgages.

However, as of August 1st, 2024, 30-year amortization will now be available for those meeting the following criteria:

The new purchase must be a new build home or condo. (Resale purchases are ineligible).

Property must be owner occupied.

At least one borrower must be a first-time home buyer.

The definition of a first-time homebuyer relating to this program can be defined as follows:

The borrower has never owned a home in the past.

The borrower has not occupied a property as their principal residence owned or partially owned by either themselves or by their spouse/common law partner.

The borrower is recently separated or divorced from a marriage or common law partnership.

Why Choose a 30-year Amortization?

As the mortgage is spread out over a longer period, your mortgage payments will be lower compared with the traditional 25-year amortized mortgage. For example, on a $500,000 mortgage at 4.44%, the payment difference works out to $247.06 per month. This can make a huge difference, particularly for someone experiencing home ownership for the first time.

The lower payment will also lower your debt-to-income ratios, meaning that you will qualify for a larger mortgage.

For instance, with a household income of $150,000 and a rate of 4.44%, the maximum you can expect to qualify for would be a mortgage of roughly $665,000 on a 25-year amortization.

If we bump that to 30 years, the amount increases to roughly $710,000. The $45,000 difference could mean the difference between qualifying for the home you love vs. one that will just get you by.

Note that a 30 year amortization does not mean that it will take you 30 years to pay off the mortgage as I explain in my blogs on The Benefits of 30 Year Amortization and Why Your Initial Amortization is Irrelevant.

One other thing to note is that choosing a 30-year amortization will result in an insurance premium increase of 0.20%. The standard insurance premiums are as follows:

Down Payment % Premium with 25 year Am Premium with 30 year Am

5% to 9.99% 4.00% 4.20%

10% to 14.99% 3.10% 3.30%

15% to 19.99% 2.80% 3.00%

Conclusion

Every once and awhile, we see a change to mortgage regulations. While the increase in amortization on insured mortgages is only available to a select few, it’s possible that the Department of Finance could allow 30-year amortization on all insured mortgages in the future. It’s a baby step for now, but at least a step in the right direction.

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Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage Broker of the Year in 2018 - 2021, 2023, and can be seen as the exclusive mortgage broker on season 2, 5-7 of TV’s Top Million Dollar Agent.(Global, Slice TV and Rogers)