Why the new CMHC rules may not affect you
By NextHome Staff
July 24, 2020
July 24, 2020
At the beginning of June, Canada Mortgage and Housing Corp. (CMHC) announced its decision to tighten the guidelines for insured mortgages as of this month. This applies to mortgages with down payments of less than 20 per cent that require CMHC default insurance.Given the recent COVID-19 pandemic, there have been varying outlooks of how the Canadian housing market will be impacted. Evan Siddall, CEO of CMHC – who is also scheduled to depart from the organization later this year – strongly believes that Canadian housing prices will be lowering despite upward trends seen across the country. As a result, he implemented these new policies to stop borrowing from who he deems to be riskier buyers.When he made this decision, there was a lot of disappointment among first-time homebuyers, as they believed this directly targeted them and negatively affected their ability to buy a home. Now that the dust has settled around this and these changes are in full effect, we're gaining more insight into who may be affected, and how – some good news for those worried first-time buyers.
So, what exactly are the new CMHC guidelines?
As of July 1, the following rules came into effect for insured mortgages:- The minimum credit score increased to 680 from 600, for at least one borrower
- Buyers can no longer borrow money for a down payment (does not include family gifts)
- Gross Debt-Service ratio decreased to 35 from 39 per cent (lowers affordability)
- Total Debt-Service ratio decreased to 42 from 44 per cent (lowers affordability)
- Multi-unit mortgage insurance refinancing is suspended (unless funds are used for repairs or reinvestment in the property)