CHMC Insured & Insurable Mortgage Changes

No more rumours… It’s official.

CMHC is decreasing affordability to first time buyers, anyone who has less than 20% down, and insurable (bulk insurance) mortgages.
*please check out my more questions below…
**There is no change to down payment rules…

If you have clients who are purchasing with less than 20% down and their ratios are tight (or even … just average), this affects them. 

This decreases affordability by 10%!

Effective July 1, we will have the following changes:

  1. Limiting the GDS/TDS ratios to 35/42 from 39/44,
  2. Making sure at least 1 borrower has a 680 credit score, and
  3. Non-traditional sources of down payment will no longer be treated as equity for insurance purposes. *Either borrowed down is now being banned and/or this will increase insurance costs more for borrowed down clients.

Affordability Decreases 10%…

Let’s take a $500,000 purchase with $50,000 down payment. The mortgage would be $463,950 (after $13,950 in CMHC fees).

Right now, we’re looking at needing an income of $93,300 to purchase this property at a GDS requirement of 39%. (Property tax at $1,800, condo fees $300, heating at $50.)

This income required increases to $103,970 in order to purchase the same property. 

So, this is a 10.3% increase in the requirement of income.

Alternatively, a $93,300 income would provide for a purchase of $447,000. Or, just 10.6% less.

Questions Unanswered:

  1. Will Genworth and Canada Guarantee follow suit for insured files?
  2. Will CMHC require Genworth and Canada Guarantee to follow suit for insurable files?
  3. How long will this be for?
  4. What the actual fuck?!