30 Year Amortization Now Available on Some Insured Mortgages

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  andWhy 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: 

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.