Why chasing affordability is futile and how accessibility can solve Canada’s housing crisis.

Introduction

Starting December 15th, buyers can secure insured mortgages for homes priced up to $1.5 million—up from the current $1 million limit. For a city like Toronto, where even entry-level detached homes hover well beyond $1 million, this shift feels more in sync with market realities. Unlike previous attempts at tinkering with affordability—like shared equity programs—this practical adjustment promises to trigger real, near-term effects, especially in the $1 million to $1.5 million segment of the market.

Why the Old $1 Million Cap Felt Outdated

• Previous Limit: For homes priced above $1 million, buyers needed a 20% down payment and couldn’t rely on insurance-backed mortgages.
• Impact: In a market where $1.3 million or $1.4 million isn’t exactly “luxury,” that steep upfront requirement pushed many would-be buyers out of the game or forced them into financing structures that felt burdensome.

Example Under Old Rules:

• Property Price: $1.4 million
• Required Down Payment (20%): $280,000

This high barrier often led buyers to scale back expectations or postpone their purchase altogether.

What Changes Under the New $1.5 Million Threshold

• New Insured Mortgage Limit: Raising the cap to $1.5 million allows buyers to access mortgage default insurance on homes previously out of reach.
• Lower Minimum Down Payments:
• 5% on the first $500,000
• 10% on the remaining amount up to $1.5 million

Example Under New Rules:

• Property Price: $1.4 million
• Down Payment Calculation:
• 5% of first $500,000 = $25,000
• 10% of remaining $900,000 = $90,000
• Total Down Payment: $115,000

This shift effectively cuts down the required upfront cash from $280,000 to $115,000. Retaining that additional $165,000 means buyers have more options: keep cash on hand for renovations, maintain flexibility with closing dates, or simply bolster their financial security.

Why This Beats Shared Equity Programs

Previous federal attempts to improve affordability included shared equity initiatives—programs that never really took off in high-value markets like Toronto. In theory, shared equity aimed to reduce monthly costs, but the complexity and restrictions often turned off would-be participants.

Raising the insured limit is more straightforward. It doesn’t saddle you with future resale conditions or shared ownership complexities. It simply aligns borrowing rules with real price points, making the whole process more natural and immediate.

Expect a Spark in Activity—More Than Any Rate Shift Announcement

• Likely Impact on Market: Homes priced around $1.2 to $1.4 million could see a surge in interest. Many buyers who once dismissed these properties as financially out of reach can now consider them viable options.
• Condos and Houses Up to $1.5 Million: Expect more showings, more offers, and more activity in this price range. It’s a far more direct and tangible incentive than waiting for a minor rate drop announcement that may or may not affect buyer confidence.
• Sellers Benefit Too: With more buyers in the mix, sellers in that range might enjoy a more fluid market, leading to smoother negotiations and fewer extended listing periods.

Considerations and Next Steps

• Not a Silver Bullet for Affordability: Raising the insured limit doesn’t magically drop home prices or increase housing supply. It just makes it simpler for qualified buyers to break into the market at current price levels.
• Insurance Premiums: Remember, insured mortgages add an insurance premium to the loan, typically rolled into monthly payments.
• Talk to a Mortgage Specialist: Before jumping in, consult with a lending professional to understand how these new rules fit your individual situation.

Bottom Line

Adjusting the insured mortgage cap to $1.5 million is a practical step that reflects the actual state of Toronto’s housing market. It removes a financial roadblock that kept many well-qualified buyers stuck on the sidelines. In contrast to the lacklustre shared equity efforts, this more direct approach should create immediate, tangible effects—buyers can close gaps in the $1 million to $1.5 million range, and sellers can tap into a broader pool of interested, financially ready prospects. If you’ve been contemplating a move in Toronto, this change might be the signal you’ve been waiting for.

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