05/06/2020
Mortgage Rule Change Alert - Urgent
It looks like our Federal Government is are making another policy change regarding qualifying for a mortgage
This will hit you extremely hard if you are Purchasing, Refinancing or renewing your mortgage
Essentially it will reduce your purchasing power by 11% or it is equal to the Government increasing the stress test to 6.30%!!!
This takes effect on July 1 so if you have are looking for that perfect home it is best that they you do so before the end of the month
Even if you are already pre-approved, those pre-approvals will be null and void as of July 1st when the new calculations take effect and you will have to qualify under the new rules
Currently for insured mortgages we are in the 2.24% Range so a good time to be purchasing or renewing if at all possible
If your mortgage is up for renewal in the next 2 years it would be advisable to consider doing an early renewal (Special Program) so that you can lock in your rates for the next 5 years at these near historic low rates
Let me know if you have any questions as i would be happy to answer them
Thanks
Kelly
Yesterday afternoon, CMHC announced changes to its mortgage insurance underwriting and acceptance criteria.
Effective July 1, the following changes will apply for new applications for homeowner transactional and portfolio mortgage insurance:
• The maximum gross debt service (GDS) ratio drops from 39 to 35
• The maximum total debt service (TDS) ratio drops from 44 to 42
• The minimum credit score rises from 600 to 680 for at least one borrower
• Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes
You can read the full release HERE.
It is important for our members to note that this is a CMHC announcement, and as the release states: “These decisions are within CMHC’s authorities under the National Housing Act.” This is not a directive from the Ministry of Finance. As such, as Canada’s private mortgage insurers, Genworth’s and Canada Guaranty’s criteria is not directly affected. Early indications seem to suggest that the private insurers will not follow in lockstep with these changes, but each are currently determining their specific response. More details are expected early next week, and I anticipate some differentiation in risk appetites will create additional competition and a shift in market share over time.
We will keep you informed of additional details as they become clear.
