New insured mortgage changes are now in effect! Here’s what they might mean for you!
First, What is an Insured Mortgage?
An insured mortgage is applicable when the borrower has a down payment of less than 20%. Lenders require insurance against default, with the borrower paying a premium that is added to the mortgage.
So What's New?
This month, two major changes to insured mortgages have officially been implemented. Here’s a brief overview:
1. Expanded Eligibility for 30-year Amortizations for First-time Homebuyers (FTHB) and All Buyers of New-Build Properties
While 30-year amortizations for first-time homebuyers (FTHB) purchasing new-build properties are already available, the recent update now extends this option to anyone buying a new-build property and FTHB purchasing any owner-occupied property.
With the new changes to insured mortgages, a FTHB earning $75,000 annually can now qualify for approximately 7.2% more in actual mortgage financing on a 30-year amortization, even with the 20 bps surcharge to the default insurance.
2. Higher Price Caps for ALL Insured Mortgages:
The price cap for insured mortgages has been raised from $999,999 to $1,499,999—a significant change our industry has long supported. This adjustment is expected to benefit markets where average home prices exceed $1 million, reducing the burden on first-time homebuyers who often depend on the "Bank of Mom and Dad" to meet the 20% down payment requirement.
Previously, purchasing a $1.5M home required a $300K down payment. Now, with the recent changes, that same home can be yours with as little as $125K down—provided you meet one crucial condition: having the income to support a $1.375M mortgage.
Down Payment Structure Stays the Same:
5% on the first $500,000
10% on amounts between $500,000 and $1.5 million
Market Effects:
The goal of these changes is to make mortgage qualification easier for more individuals. Here's the potential market impact:
Effect on Buyers: A 30-year amortization increases qualifying income, allowing some buyers to enter the market. Even minor adjustments can increase interest, boosting demand and putting upward pressure on home prices. Purchasing now might mean less competition and better prices before demand raises values.
Selling a Home: For homes priced between $1M and $1.5M, the recent price cap adjustments have likely widened the buyer pool. More buyers can now qualify with a reduced down payment for homes over $1 million, potentially resulting in higher offers.
If you're thinking about buying or selling, now is the time to strategize. Contact me to discuss how these changes might affect your objectives.
Coming Late January: Insured Refinances for Secondary Suites
The upcoming round of insured changes will focus on refinances for secondary suites. Stay informed—I’ll keep you updated as more information becomes available!
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