Starting July 1st, 2020, buyers who offer down payments of less than 20 percent in order to access CMHC’s default mortgage insurance will require higher credit scores, lower debt ratios, and will not be allowed to borrow monies used for down payments.
Specifics include:
a minimum credit score of 680 instead of the current 600
a limit total gross debt servicing ratios to its standard requirement of 35 percent of annual income, compared with a threshold as high as 39 percent currently, and total debt servicing to 42 percent versus as much as 44 percent now
borrowed money can not be used for down payments.
The impact? While these changes are small, they will affect those who were on the cusp of pushing their limits. The largest impact will be to the debt service ratios, which could reduce a buyer’s financial buying power by 12 percent. While there are other mortgage insurance companies, CMHC is the largest in Canada.
Questions about how this will affect you as a buyer, or as a seller? Let’s chat - fill out the form on the bottom of the page or email us directly here.
