Federal government to expand Canadians' access to 30-year insured mortgages | Daily Hive

Federal government to expand Canadians' access to 30-year insured mortgages and make rates easier to compare

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Homebuyers with larger down payments could gain more mortgage options under Prime Minister Mark Carney’s 2026 federal budget, alongside measures to make borrowing costs easier to compare.

The budget released today outlines raising the home price limit for optional mortgage default insurance from $1 million to $1.5 million. It would also allow these insured mortgages to be repaid over 30 years when at least one borrower is a first-time homebuyer or the property is newly built.

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Mortgage default insurance protects lenders against losses if a borrower fails to repay. It is generally required when a buyer puts down less than 20 per cent, but lenders can also choose to insure eligible mortgages with down payments of 20 per cent or more. The budget’s planned expansion of optional mortgage default insurance applies to this latter category.

Current federal insurance rules for these mortgages generally limit repayment periods to 25 years and require the property to be worth less than $1 million. The federal government notes that expanding eligibility would encourage competition between lenders and give buyers more flexibility.

Similar changes for buyers with smaller down payments already took effect in December 2024. Those previous reforms raised the home price limit for high-ratio insured mortgages to $1.5 million and expanded access to 30-year repayment periods for first-time buyers and purchasers of newly built homes.

The higher limit would also better reflect the cost of buying a home in expensive markets — especially in Metro Vancouver and Greater Toronto, where prices rose sharply in the last few years since the pandemic.

Borrowers with larger down payments can already obtain uninsured mortgages with longer repayment periods, subject to their lender’s rules. The new policy would expand which mortgages can qualify for insurance.

Spreading the same loan over 30 years rather than 25 years generally reduces monthly payments, but increases total interest costs if the interest rate is unchanged. The repayment period is separate from the mortgage term, which determines how long the current contract remains in effect.

The budget also announced new regulations to improve the information publicly available about insured mortgage rates, with the Bank of Canada publishing the data. The federal government notes that more current and detailed information would help borrowers compare offers and shop for a better deal.

Another measure would give the Canada Revenue Agency (CRA) legal authority to provide an income verification service through agreements with mortgage lenders and insurers.

The federal government will spend $13 million over three years, beginning in the 2027/2028 fiscal year, to develop and test the service. After that initial phase, it intends to fund the service through arrangements with the industry. The aim is to help lenders and insurers check borrowers’ income more reliably, improve mortgage application processing, and reduce fraud.

As well, there will be consultation with the mortgage industry and other stakeholders on making early payment penalties for insured mortgages easier to understand and compare. These charges can come up when borrowers pay off or renegotiate a mortgage before its term ends or exceed their permitted extra payments.

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