CMHC’s new rules may not affect you
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Homebuyers have alternatives to Canada Mortgage and Housing Corporation’s new, stricter mortgage rules.
In early June 2020, CMHC announced new rules for insured mortgages (those with less than 20% down payment). The changes, which CMHC says are designed to prevent over-borrowing, will come into effect July 1, 2020. These changes include:
- Maximum Gross Debt Service (GDS) ratios will be lowered from 39% to 35%
- Maximum Total Debt Service (TDS) ratios will be lowered from 44% to 42%
- The minimum credit score required will rise from 600 to 680 for at least one household borrower
- Many non-traditional sources of down payments that ‘increase indebtedness’ will be banned (such as credit cards, unsecured personal loans or lines of credit)
According to Amedeo Perfetto, Broker, Director of Lending at Educators Financial Group, the new rules could mean that 5% of homebuyers will no longer be able to qualify for a mortgage, and those who do qualify will have their buying power reduced. However, he points out that homebuyers still have options.
Good news: Canada’s other two mortgage default insurers are not changing their criteria.
In a positive announcement for borrowers, both Genworth Canada and Canada Guaranty have stated that their current qualification standards will not change. “Genworth and Canada Guaranty’s decision to not follow CMHC’s lead means borrowers continue to have options,” says Amedeo. “For those who qualify, today’s historically low rates could mean that now’s the time to buy.”
Educators’ Mortgage Agents are industry experts who can help buyers understand all their options.
Buying a home and getting a mortgage are important decisions, and it pays to work with a professional who has your needs in mind. The experienced and professional lending specialists at Educators know today’s market and will work with a variety of lenders to get the mortgage that’s best for you.
Have one of our Mortgage Agents contact you about our educator-specific mortgage solutions.
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