CMHC Rule Changes
Last week, the Canadian Mortgage and Housing Corporation (CMHC) announced a new regulation on mortgage insurance for property buyers, slate to begin July 1, 2020
Social Real Estate wanted to share this information with you as it could potentially impact your property buying journey. Under the new rules, property buyers with a down payment of less than 20% (and requiring mortgage insurance) will need to meet the following requirements:
- One property owner/mortgage borrower will need to have a minimum credit score of 680 (an increase from the current 600).
- Non-traditional sources of funding for down payments classified as debt (i.e., loans or other borrowed funds) will no longer be allowed or treated as equity for insurance purposes.
- New debt-ratio policy: the Gross/Total Debt Servicing (GDS/TDS) ratios will change to 35/42 from 39/44
What does that mean for you, and how can Social Real Estate and our partners help?
With the change in the debt-ratio policy, you may have difficulty with getting a mortgage pre-approval if your down payment or credit score does not meet the minimum standards as listed above. Or one of the significantly noticeable differences is the decrease in your purchasing power as the new rules limit the amount of debt - or mortgage amount - you will be allowed to take on. As a result, the property you had initially thought you could afford may now be out of reach because your mortgage approval is not high enough.
So if you are thinking of buying a property this year, you may want to consider getting ahead of the curve and finalizing your purchase (firm deal) before July 1 to avoid this dilemma. Social Real Estate and our mortgage broker partners will gladly work with you during this limited time frame and expedite the process to find a property that will meet your expectations and needs.