On June 4, 2020, the Canadian Mortgage and Housing Corporation (CMHC) announced new qualification rules for mortgage insurance that may affect those looking for a home. The CMHC is a government owned corporation that provides mortgage insurance for home purchases with a down payment of less than 20%. For banks and lenders, this mortgage insurance is a requirement for any down payment amount below 20% of the cost of the home and is either paid as a lump sum or rolled into your monthly mortgage payments.
Starting July 1, the new rules taking affect include:
What does this mean for home buyers?
Those buying a home with less than 20% down payment and going through CMHC for their mortgage insurance may find their purchasing power decrease. Some experts have estimated a reduction of up to 11%. For example, a household with an annual gross income of $120,000 would have previously qualified for a home costing $565,000. Under the new rules the same household would only qualify for a $502,000 home.
Keep in mind these new changes are only applicable for those planning on going through CMHC for their mortgage insurance. Other private providers such as Genworth and Canada Guaranty have announced that they will not follow the rule changes implemented by CMHC.
For more information on how this may affect your home buying journey, contact one of our sales people today.