Mortgage rule changes for new homebuyers and the Home of the Week: Canadian real estate news for September 20

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Here are The Globe and Mail’s top housing and real estate stories this week and one home worth a look.

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Ottawa to ease mortgage rules in bid to help buyers afford pricier homes

Canadians will be able to get mortgage insurance for pricier homes and first-time buyers will be able to stretch out their payments longer under changes to federal policy that aim to help younger buyers get into the housing market, writes Rachelle Younglai and Bill Curry. Under the new rules, which take effect on Dec. 15, the price cap for insured mortgages will be $1.5-million, up from $1-million. First-time homebuyers will be allowed to take out an insured mortgage with a 30-year amortization for all types of homes. And more buyers will be allowed to take out an insured mortgage with a 30-year amortization on a preconstruction home. Not all investors are eligible. The move comes as the federal government has faced pressure to make housing more affordable for younger Canadians.

And, as Younglai reports, industry experts said the announcement of the new mortgage rules is already attracting prospective buyers back into the market. Mortgage brokers and realtors said they have been inundated with calls since the news broke on Sept. 16., asking about how much homebuyers could save in monthly payments and shared concerns the changes could drive up home prices. Home sales have been slow since the Bank of Canada started raising interest rates in early 2022. Although the central bank has cut interest rates three times since June, activity didn’t increase as mortgage rates are still relatively expensive.

The Globe wants to know how you feel about the new mortgage rules. Do you have any questions? On Monday, reporters Rachelle Younglai and Erica Alini will host a Q&A to answer how the new rules could affect Canadians’ plans to buy a home. Share your questions here.

The new mortgage rules will ease down payment and cashflow hurdles – but there’s a catch

While the new changes to the federal mortgage rules could help homebuyers access lower mortgage rates and pay smaller installments over a longer period, the changes would also allow borrowers to take on more debt and pay more interest on it, writes Erica Alini. Consider a buyer who purchases a property worth $649,096 – equivalent to the average home price in Canada as of August – with a 10-per-cent down payment. With a competitive 4.09-per-cent, five-year fixed rate, their monthly payment would be $3,198 on a 25-year amortization. If the same borrower was able to sign up for a 30-year amortization, their payment would shrink to $2,895, or $303-a-month lower. But by taking longer to hack at their mortgage, they’d be paying more in interest. With a 30-year amortization, the interest charges would add up to $439,827, or nearly $83,000 more than if they’d chosen a 25-year mortgage.

Federal tax on vacant homes has failed to raise any meaningful revenue

Ottawa’s underused housing tax (UHT) – which took effect at the start of 2022 and billed by the government as a way to deter foreign real estate investors from leaving their homes in Canada empty – was created to impose an annual 1 per cent tax on the value of foreign-owned real estate that is deemed to be underused or vacant, and to invest that money toward housing affordability initiatives. But according to documents recently tabled in the House of Commons, the Canada Revenue Agency had assessed just $74-million through the UHT as of mid-June this year, with a significant amount of the returns having no amount owing, writes Alini. The CRA said it spent a total of $59-million to implement and administer the tax over the two years since its launch. The numbers appear to confirm a long-standing criticism of the UHT by tax experts, who warned the levy would impose burdensome tax-filing requirements on Canadians who ultimately wouldn’t owe anything to the government.

Opinion: Renting is often a better deal than buying. That’s because of how expensive it is to own a home

While there is a common perception that renting is just “throwing money away,” it’s important to understand the true costs of owning a home, writes Benjamin Felix. While the full cost of renting is obvious – it’s the rent – the total costs for a homeowner are less obvious and often hard to measure. The big expenses are property taxes, maintenance costs, depreciation, and the cost of capital, which includes not just mortgage interest costs, but also the opportunity cost of not investing that down payment you worked so hard to save. There are many worthwhile considerations in the rent-vs.-own decision, but a fundamental starting point is understanding how much you will be spending on housing. When you know how to compare total costs, you see which of renting or owning is a better financial option for your specific decision.

Home of the Week: Pre-Confederation log cabin is a home to memories

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5588 Wellington County Rd. 39, Guelph/Eramosa, Ont. – Full gallery here

Estimated to be nearly 200 years old, this five-bedroom log cabin was named Bleak House in the 1800s, after a Charles Dickens novel of the same name – an edition of the novel from that era is still in the house. Today, the cedar logs, squared and dovetailed at the corners, still stretch the full 40-foot length and 30-foot depth of the building. Previous owners turned the original dining room into a primary suite with a whirlpool bathtub and created an eat-in kitchen with wooden cabinets and an island. A large solarium with expansive windows offer views of the property’s verdant surroundings, and makes for a perfect spot for lounging and entertaining.

Editor’s note: An earlier version of this article incorrectly stated that all homebuyers, including investors, will be eligible to take out an insured mortgage with a 30-year amortization to buy a preconstruction home. Investment purchases of income properties are not eligible. This version has been updated.