CMHC’s New Mortgage Rules Start July 1 – Here’s What You Need to Know
Monday Jul 27th, 2020
The government-backed Canada Mortgage and Housing Corporation (CMHC) announced it will be tightening the mortgage rules starting July 1, 2020. This move by the CMHC is to protect individual and national economic health by ensuring mortgage borrowers are not putting themselves into too much debt.
What this means for homebuyers:
- It will be harder to obtain CMHC’s default mortgage insurance, which means having a down payment of 20% or more will help you acquire a mortgage easier.
- A credit score of 680 is now required, rather than the previous 600.
- There will be changes to the debt servicing ratios. The Gross Debt Service (GDS) ratio is the percentage of your household income that is used to cover your housing expenses, like mortgage, condo fees, and heating. With the new rules, this should be at 35%, compared to 39% under the old rules.
The Total Debt Service (TDS) ratio - which includes all your GDS expenses plus other debts like car payments - should be at 42%, compared to the previous 44%. Use the CMHC’s Debt Service Calculator to compare your monthly debt payments and housing expenses to your gross household income.
Canada’s other two mortgage insurers, Genworth Canada and Canada Guaranty, confirmed they will not be following CMHC’s lead to change their underwriting policy related to debt service ratio limits, minimum credit score and down payment requirements.