The “For Sale” signs have been staying up much longer than in the past, especially from April to September. But those signs may soon show “Sold” signs soon as new mortgage rules came into place December 15th. These are the boldest mortgage reforms in decades, allowing the average person the ability to afford a home.
Increase in price cap for insured mortgages from $1million to $1.5million
Home buyers who could not afford to pay the minimum 20% downpayment for a home, would have to get mortgage insurance, allowing for a smaller down payment and this would protect lenders from default.
Since 2012 the insured mortgage cap stood at $1million. Home prices have surged over 70% since then.
The new limit for an insured mortgage is now $1.5 million, an increase of 50%. The home price cap change will now work in the following manner:
- Up to $500k of the purchase price, a minimum down payment of 5% is required (no change from the previous amount).
- From $500k to $1.5 million, a minimum 10% down payment is required (previously only extended to $1 million).
- For a $1,499,999 home price, a blended minimum down payment of 8.33% is required, far less than the previous 20% required, allowing first-time buyers access homes which were previously unavailable to them because of the insured mortgage cap.