Alright, folks, it’s finally happened. The federal government has stepped up and said, “Enough is enough!” They’ve bumped up the insured mortgage purchase price limit to a whopping $1.5 million, up from the previous $1 million cap that’s been hanging around since 2012—like that friend who just doesn’t know when to leave the party. And honestly, given how much the average home price has skyrocketed, this change was way overdue!
To put it into perspective, the MLS Composite Price Index for the GTA has gone from $447,400 in 2012 to an eye-popping $1,068,700 as of September 2024. (Yes, you read that right, over a million!) Good luck finding a detached home in the City of Toronto for under $1 million these days. It’s like searching for a unicorn that also bakes you fresh bread.
So, what does the $1.5 Million Insured Mortgage Limit mean for you?
Well, it’s basically the government's way of saying, “We get it; housing is expensive, and we’re trying to help!” Now, you could potentially buy a $1.5 million home with only a $125,000 downpayment instead of the previous soul-crushing $300,000. That’s a difference of $175,000—enough to buy a very fancy car, pay off some student loans, or, if you’re feeling extra, invest in that luxury all-inclusive vacation you’ve been daydreaming about.
Breaking It Down: How the New Rule Works
Now, let’s take a closer look at how this change plays out with some real numbers. Imagine you’ve found your dream house for $1.5 million, and you’ve scraped together that $125,000 downpayment (probably with the help of your parents, grandparents, and every distant relative you could find). Table below shows how it’s likely to play out for you.
As you can see, you will end up making compromises as is always the case. You may not like to choice but most likely you will get boxed into one whether you like it or not.
The Dreaded “C” Word: Closing Costs
Ah, closing costs—the uninvited guest at your home-buying party. In addition to your downpayment, you need to budget for these costs, which typically land between 2% to 5% of your purchase price (sorry, they don’t accept Monopoly money). And no, these expenses can’t be added to your mortgage; they need to be paid out of your pocket.
Here’s the biggie: the Land Transfer Tax. If you’re buying within the City of Toronto, you’ll need to shell out $44,475; outside of Toronto, you’re looking at $22,475—assuming you’re a first-time buyer and qualify for the rebate. But wait, there’s more!
The PST on your Mortgage Default Insurance Premium is another closing cost you’ll have to cover upfront. No rolling it into your mortgage, no “pay later” option—this one’s on you at closing.
Neil’s Sage Advice: What’s the Best Scenario for You?
So, with all these options, what’s the best move? Well, let’s keep it real—household income is tough to boost overnight, and saving up a downpayment like $225,000 or $300,000 doesn’t exactly happen in the blink of an eye unless you win the lottery (if you do, congrats and call me). Realistically, you’re likely constrained by both your income and how much you can save.
Here’s the deal: Before you start booking home tours and picturing yourself sipping coffee on the patio of your dream home, it’s a smart move to partner with a knowledgeable mortgage broker. They’ll help you figure out what’s truly feasible for you, not just for the purchase or closing moment but for the long haul. Think about where you want to be 5 to 10 years down the line. Are you aiming to build equity fast, or do you prefer a more flexible approach, even if it means higher monthly payments initially? It’s about planning for the future, not just about comparing the Interest Rate on the mortgage.
At a macro level, this rule change doesn’t just help with affordability; it’s also a win for saving on your mortgage costs. Non-bank lenders have traditionally been the go-to for competitive rates and flexibility in the insured mortgage market, offering more value than the Big Banks that often dominate the uninsured space. With this new policy, competition is ramping up, which means better options for you as a buyer. This is another reason why working with a mortgage broker is a no-brainer—they can tap into this competitive landscape to find you the best deals which are otherwise not accessible, even in high-stakes markets like Toronto and Vancouver.
Who’s Actually Benefiting Here?
The new $1.5 Million Insured Mortgage Limit is fantastic news—for those who already have a household income over $205,000 and a downpayment of at least $75,000. If that’s you, congrats! You’re in a better position to take advantage of the new $1.5 million limit. But for others, it won’t get easier, but the best approach is careful planning, knowing your options and being opportunistic.
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