Main Content

Home » Important Mortgage Changes From CMHC

Important Mortgage Changes From CMHC

Mortgage Update

Obtaining mortgage insurance for a home purchase is about to become more challenging on July 1, particularly for first-time buyers

The Canada Mortgage and Housing Corporation (CMHC), Canada’s national mortgage insurance provider, unveiled stricter underwriting policies on Thursday for insured mortgages. The measures include:

🏡 Limiting Gross Debt Service (GDS) ratios to 35% (from 39%)

🏡 Limiting Total Debt Service (TDS) ratios to 42% (from 44%)

🏡 Raising the minimum credit score to 680 (from 600) for at least one borrower

🏡 Banning non-traditional sources of down payment that “increase indebtedness”

🏡 CMHC’s changes will effectively reduce homebuyers’ purchasing power by up to 11% “

🏡 Someone earning $60,000 with no other debt and 5% down could afford approximately 10.9% less home under CMHC’s new rules,” the site noted. “That’s like jacking up the minimum stress test rate from 4.94% (where it lies today) to 6.30%!”

🏡 Roughly 18% of CMHC’s high loan-to-value originations had a Gross Debt Ratio of more than 35%, according to a report from RBC Economics.

🏡 And about 5% of CMHC’s originations had credit scores of less than 680, according to data from Mortgage Professionals Canada