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:
- Limiting the GDS/TDS ratios to 35/42 from 39/44,
- Making sure at least 1 borrower has a 680 credit score, and
- 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.
- Will Genworth and Canada Guarantee follow suit for insured files?
- Will CMHC require Genworth and Canada Guarantee to follow suit for insurable files?
- How long will this be for?
- What the actual fuck?!