New CMHC Rules

Increased restrictions are coming for high-ratio mortgages.

Recently, Finance Minister Jim Flaherty outlined new rules that will affect CMHC-insured mortgages. These changes will take effect July 9, 2012 (any current mortgage applications must be approved by this date to remain unaffected).

• Maximum amortization is 25 years
• Maximum refinance Loan-to-Value (LTV) is 80%
• Maximum Gross Debt Service (GDS) is 39% and Total Debt Service (TDS) is 44% (learn more about qualifying requirements)
• Maximum purchase price is $1 million

What does this mean for you?

The reduced amortization period, combined with the lowered GDS ratio, will likely make it harder for some home buyers to qualify for their mortgage loan amount. Historically, the TDS of our True North Mortgage clients is around 32%; however, 5% of our clients do have a GDS of 40 or greater. We also don't see many refinances around an LTV of 85%.

Overall, the maximum purchase of $1 million for an insured mortgage could be the largest hindrance to the housing market. This restriction will likely reduce the ability of clients to get financing on these pricier homes, which may result in a drop in higher home values. As well, lenders may be hesitant with LTVs greater than 80%, for fear of loss of liquidity in the higher end market, and may decide to place a 'self-imposed' 75% LTV cap on larger mortgages.

Have questions about how these restrictions will impact your house hunting? Or need to lock in your mortgage before that date?

Contact us anywhere you are in Canada, we're here to help.