New 🇨🇦 Mortgage Rules💰 & What a $4,000 Budget Gets You 🏠

This week, we're exploring the Canadian Government's new mortgage rules in more detail and comparing what a $4,000 monthly budget gets you in Toronto vs. Calgary, both as a renter and first-time home buyer.

New 🇨🇦 Mortgage Rules

The Canadian Government introduced new mortgage rules on September 14th.

Insured Mortgages
The price cap for insured mortgages is increasing from $1 million to $1.5 million.

Longer Amortization Periods
Mortgage amortization periods are also extended to 30 years for all first-time homebuyers and anyone buying a new build. 

These changes go into effect on December 15, 2024.

The Takeaway?

Basically, people can now buy more expensive homes with a smaller down payment. Hooray for more debt! This will likely inflate the number of buyers in the $1 million to $1.5 million range. Which, naturally, means the price of homes in that range will rise too. 

The longer amortization periods will lower monthly mortgage payments a little, with the flip side being you'll be with your lender for an extra five years. It’s a tradeoff: do you want slightly more manageable monthly payments or to be mortgage free five years earlier?

Let’s break down the numbers for a $1,250,000 home, comparing a regular mortgage to an insured one, both with a 25-year amortization.

* CMHC Insurance Fee is 3.1% for a loan to value ratio of 90%.
** Insured mortgages usually come with a discount; here, we've assumed a fairly typical 0.3%.
*** CMHC Insurance Fees are typically rolled into the total mortgage amount, so you'll be paying interest on the fee as well! In this case, the total monthly mortgage amount includes both the original mortgage amount of $1,125,000 and the CMHC fee of $34,875.

So, you can either pay a bit more upfront and avoid CMHC insurance, or you can put down less, pay insurance, and enjoy the comfort of knowing your lender is less nervous about you defaulting, rewarding you with a slightly lower rate.

What does a ~$4,000 Monthly Budget Get You in Toronto and Calgary?

Now that we've reviewed the new mortgage rules, let's examine what a "reasonable" $4,000 monthly budget gets you in Toronto and Calgary.

Buying a House for ~$735,000

For around $735K (or a monthly budget of just under $4,000) you’re looking at a “starter home” in both cities. 🫠 The Toronto version? It’s probably going to need a makeover. Calgary? You might luck out with a tasteful 1950s bungalow.

Toronto

950 St Clarens Ave | Sold: $731,000
This is a 3+1 bedroom, 2 bathroom semi in Corso-Italia in Toronto. Link here. Needs a little refresh, but a great neighbourhood!

Calgary

1813 3 Street NW | Sold: $737,000
This is a 2+1 bedroom, 2 bathroom bungalow in Mount Pleasant in Calgary. Link here. Prices in Calgary have definitely increased over the last couple of years. Seems like their Blue Sky City marketing campaign is working!

Renting for ~$3,550 per month

Let’s see what you can rent for around $3,550 in Toronto and Calgary.

Toronto

1454 Dufferin Ave. | Rent: $3,550 per month
This is a 3+1 bedroom, 2 bathroom semi in Wallace Emerson in Toronto. Link here. Newly renovated with a detached garage.

Calgary

1813 3 Street NW | Rent: $3,550 per month
This is a 2+1 bedroom, 2 bathroom bungalow in Rosedale in Calgary. Link here.

The Verdict?

Whether you’re buying or renting, you’re spending more than you’d like. Owning gives you the freedom to paint your walls whatever colour you want while tying you to a 25 or 30 year mortgage. Renting? You can bounce when the roof starts leaking, but you’re not building any equity.

If you're considering between renting and owning, check out our previous newsletter for some rent vs. buy tips. If you're deciding between Toronto and Calgary, sorry, no calculators for that yet—you’ll just have to trust your gut (and maybe your wallet).😉