CMHC Mortgage Rule Changes Coming
Our mortgage specialists have summarized the recent CMHC changes coming to Canada starting next month.
The announcement made by CMHC included more restrictive underwriting criteria. These changes will be effective on July 1, 2020, and apply to new purchases thereafter.
Below is a list of CHMC’s Changes to Underwriting Criteria
The maximum Gross Debt Servicing Ratio (GDSR) is decreasing to of 35% of income. Prior to the changes, the ratio was allowed to be as high as 39%. The sibling of the GDSR is Total Debt Servicing Ratio (TDSR) which will have a new maximum of 42% of income, previously the maximum was 44%. The effects of the changes will come through in purchasing power for homebuyers.
- The new credit score minimum for at least one borrower will be 680. Prior to the changes, the minimum credit score was 600.
- CMHC will no longer allow borrowed down payments, also known as flex down payments. The housing transactions with borrowed down payments account for a negligible percentage of home sales.
What do these changes mean for homeowners and homebuyers? These changes may generate stagnation in the housing market and lead to fewer home sales, as well as home prices. Ultimately, these changes have overlap and will affect upwards of 25% of housing sales.
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