As I’m sure you are aware there have been a number of policy changes and adjustments made to mortgage rules for Canadian homeowners and for first time buyers for 2025. These new rules and adjustments have been implemented with the hope that it will ensure that most middle-class Canadians do not end up paying higher taxes and that it will assist first-time buyers & stimulate new home constructions. Here are just a few of some of the changes taking place.
As of January 31, 2025 it was announced that the planned increase to the capital gains inclusion rates has been postponed. This means the portion of capital gains subject to tax remains unchanged until 2026.
Other measures that have been put into place, to ensure that Canadians don’t pay higher taxes are:
- Maintaining the Principal Residence Exemption: Profits from selling a primary home will continue to be tax-free.
- Introducing a $250,000 Annual Threshold: Individuals can earn up to $250,000 in capital gains annually at the current tax rate before the increased rate applies, as of January 1, 2026, .
- Increasing the Lifetime Capital Gains Exemption: Effective June 25, 2024, the exemption for selling small business shares and farming or fishing properties was raised to $1.25 million from the current $1,016,836.
Launch the Canadian Entrepreneurs’ Incentive: This incentive reduces the taxable portion of eligible capital gains to one-third for a lifetime maximum of $2 million, encouraging entrepreneurship, beginning in the 2025 tax year.
Adjustments to Mortgage Rules for Home buyers
In the federal budget of 2024 the Canadian government announced significant changes to mortgage rules in an effort to assist first-time home buyers and stimulate new housing construction. These changes came into effect on December 15, 2024.
Among the changes are extended amortization periods. In an effort to encourage new home construction, insured mortgages had previously been extended from 25 to 30 years for first-time home buyers purchasing new builds. This includes condos. This is being extended to all first-time home buyers and all buyers of new builds. This change aims to lower monthly mortgage payments, making home ownership more affordable while continuing to support new home construction.
Another significant change is the increased insured mortgage cap. The cap on insured mortgages was raised from $1 million to $1.5 million. This adjustment allows buyers in higher-priced markets in Toronto to qualify for mortgage insurance with a minimum 5% down payment, giving them access to homes previously requiring at least a 20% down payment.
These changes and adjustments can be confusing and it’s important to know how and why they will affect your home owning and buying experience. Please feel free to contact me in full confidence so we can talk about how this affects you personally.
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