New CMHC Rules In Response To Covid-19
Mortgage and Housing Corporation (CMHC), Canada's federal housing agency who provides insurance that protects lenders if homeowners default on their mortgage is implementing changes effective July 1, 2020. These changes, they believe, will protect home buyers reduce government and taxpayer risk and support the stability of the housing markets.
The Changes
Limit the Gross/Total Debt Servicing ratios to that of 35/42 (GTD/TDS);
Have, at least, one borrower with a minimum credit score of 680; and
Will no longer treat non-traditional sources of down payments as equity for insurance purposes
Suspend the refinancing for multi-unit mortgage insurance except when the funds are used for repairs or reinvestment in housing
What This Means
Applicants will require higher credits scores, less debt and can only use their own funds, not borrowed funds, for their down payment.
Buyers may become more diligent about afforability.
If buyers feel financialy secure with a reliable job, they may not feel threated by these changes.
Buyers already barely able to qualify, may no longer be able to move forward.
Other Options
There are private lenders who offer mortgage default insurance and are not required to adopt the CMHC rule changes. Two options: Genworth and Canada Guaranty.
Deadline
These changes come with a tight deadline effective July 1, 2020. Consider your options and make your decision in time.
