December 15th, 2024

Insured mortgage cap is being raised from 1 million to 1.5 million for people that wish to put less than 20% down.

If the cap on insured mortgages increases from $1 million to $1.5 million, this could significantly impact the housing market. Here are some potential effects: 

• Increased Access to Financing: Buyers looking for higher-priced homes will have more access to insured mortgage options, making it easier to finance larger purchases. 

• Market Dynamics: This change could stimulate demand in the higher-end market, potentially driving up prices in certain areas. 

• Encouragement for Buyers: With a higher cap, buyers may feel more confident entering the market, knowing they can secure favorable financing for larger homes. 

• Potential Risks: While it may help some buyers, it could also increase risks for lenders if higher loan amounts lead to more defaults in economic downturns. 

• Impact on Affordability: While this change could assist some buyers, it might also contribute to affordability challenges in competitive markets, as higher limits could lead to increased competition and prices. 

1.5 million dollars required $300,000 down and under new rules buyers can purchase with $125,0000 down as a minimum.  Calculating downpayment is 5% of the first $500,000 and 10% of the remainder.  Standard insurance premiums apply and are added to the mortgage based on downpayment.  If a first-time buyer, the client is allowed to take a 30-year amortization for an additional .20% insurance premium. That is a home purchase with $175,000 less downpayment! 

First Time Buyers can amortize their financing over 30 years from 25 years.

If first-time buyers are allowed to use 30-year amortizations after December 15, 2024, this could have several significant implications: 

• Lower Monthly Payments: A longer amortization period typically means lower monthly mortgage payments, making homeownership more accessible for first-time buyers. 
• Increased Affordability: With lower payments, buyers might qualify for larger loans, which can help them purchase homes in more competitive markets. 
• Longer Loan Terms: While this offers short-term relief, buyers should be aware that extending the amortization period can lead to paying more interest over the life of the loan. 
• Financial Planning: First-time buyers might have more flexibility in budgeting and financial planning, allowing them to allocate funds to other priorities. 
• Market Impact: Increased affordability could boost demand among first-time buyers, potentially driving up home prices if supply doesn’t keep pace. 

A $850,000 house purchase with a minimum down of $60,000 has a payment of $4451.91 on 25 years and $4050.59 on 30 years.   The payment difference is $401.32/month and income required to purchase this house is $10,000 less for the 30-year amortization.  Allowing families with disruption to income due to maternity leave, a bit more wiggle room in qualifying for a home purchase. 

Staying informed about these changes and their implications is essential for both buyers and the market overall! If you have specific questions or need more information, let me know!  Call or email me if you wish to discuss how the rules can help you purchase!