Why the new CMHC rules may not affect you
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)
Who could be affected?
These new rules have the potential to cut the purchasing power of many Canadian homebuyers as it decreases their overall housing affordability. At face value, we can expect this to impact first-time buyers the most, as they’re more likely to make down payments of less than 20 per cent, as well as buy a home close to their maximum affordability.
Some may not be affected at all
The mortgage rules technically only apply to lenders who use CMHC as their only insurer. In other words, not every lender (if any) will be following through with these new rules. Genworth MI Canada and Canada Guaranty are two CMHC competitors that have chosen not to adopt these stricter guidelines. So, depending on the lender you’re working with, Canadian buyers may not be impacted at all. In this climate, especially, shopping lenders and finding an unbiased mortgage advisor has never been more important and encouraged.
Changes like this are the exact reason we work with more than 30 banks and lenders at Homewise. Policies and lending guidelines are constantly changing, so having access to multiple lender options ensures that buyers can find the best mortgage for their unique needs.
Recently, we’ve received a lot of questions about how to navigate this situation. Given the many options we have available, we are able to guide our clients to the right lenders so they don’t have to worry about these new CMHC policy changes. Best of all, many top lenders with great features and rates don’t have to abide by this new criteria.
Given that these rules are new, we’re still learning how they can impact Canadian buyers. For the time being, it’s evident there are other avenues for many purchasers to get a great mortgage without being impacted by these new guidelines.
Jesse Abrams is Co-Founder at Homewise, a mortgage advisory and brokerage firm based in Toronto. thinkhomewise.com
COVID-19 clauses in Agreements of Purchase and Sale are meant to protect the parties from delays and interruptions to their deal caused by issues relating to COVID-19, including illness, self-isolation or delays with third parties. However, a COVID-19 clause, which is not carefully drafted and reviewed, may cause unnecessary confusion or delay.
Consider, for example, a common clause which contemplates an extension of a real estate transaction where either party is subject to a mandatory COVID-19 quarantine and the agreement is automatically extended, at the request of either party, for a period of 14 days.
This clause doesn't consider a situation where a party is still sick after 14 days or where a party has to stay in isolation as other members of their household remain COVID positive. In addition, most people self-isolate voluntarily, rather than it being mandatory. Would this put a party, who is self-isolating to mitigate the risk of exposure or transmission to others, in breach of the agreement? And what if the party was able to close the deal remotely, using audiovideo technology? Would they be able to delay the transaction due to a quarantine despite their ability to close?
So, what if your real estate agent includes a COVID-19 clause in an offer, or you receive one from a potential buyer? Discuss the clause carefully with your agent and seek the advice of your real estate lawyer before signing the agreement. It's important to disclose what you are hoping to achieve should an unexpected situation arise.
Certainly, there are ways to protect both the buyer and the seller from complications which may arise as a result of COVID-19. But it's important that buyers and sellers are aware of the potential pitfalls with these clauses before including them in any contract or Agreement of Purchase and Sale.
The world as we know it has changed, and we must change with it. Protect yourself and your family by speaking to an experienced real estate lawyer, and they will guide you properly and protect you to the exclusion of all others from the dangers brought forward by COVID-19.
A good real estate lawyer should also ensure you have a will or Power of Attorney. The minute any real estate deal is firm, ensure that at a minimum you have a Power of Attorney in place in the event that you are physically or mentally unable to complete the transaction.
You must protect your family and yourself.
Jayson Schwarz LLM and Jacqueline Moneta are with Schwarz Law LLP. To suggest topics for future columns or ask questions, visit 
Benjamin Moore, North America's favourite paint, colour and coatings brand, has just revealed its Colour of the Year for 2021. Aegean Teal 2136-40 is an intriguing blue-green hue that creates natural harmony and invites us to reflect and reset. And, who doesn't need a little reset after the year we've had?
"Amid uncertainty, people yearn for stability. The colours we surround ourselves with can have a powerful impact on our emotions and wellbeing," says Andrea Magno, Benjamin Moore director of colour marketing and development.
The beautiful calming tone would work well in any space in your home. We especially love how it looks in the kitchen and dining room – for a welcome pop of colour.
For more information, visit 
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