CMHC Tightens Guidelines for High Ratio Mortgages

What's Happening?

• The following changes will be effective July 1, 2020

• Maximum Gross Debt Services (GDS) drops from 39% to 35%

• Maximum Total Debt Services (TDS) drops from 44% to 42%

• At least one borrower on the application must have a minimum credit score of 680

• Downpayment must be from a traditional source of downpayment (Savings, money from immediate family member)

Why did CMHC establish these new guidelines?

• The changes made were based on their prediction that there will be a decrease in home prices varying from 9%-18%

• Due to the negative consequences of COVID-19 such as job and home loss, it will help reduce risk for the insurer and home

How will a Home Buyer looking to apply for an Insured Mortgage?

• Qualifying at Current Requirements GDS/TDS at 39/44

• Income: $70,000

• Downpayment: 5% ($17,500)

• Mortgage Qualified For: $332,500

• Maximum purchase price of $350,000

• Qualifying at the New Requirements GDS/TDS at 35/42

• Income: $80,000

• Downpayment: 5% - ($15,500)

• Mortgage Qualified For: $295,000

• Maximum purchase price of $310,000

What does this mean?

• Home buyers looking to qualify for an insured mortgage will have their borrowing power decreased by roughly 11%

• Put in your offer before July 1 to secure your mortgage

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