What’s with all these new mortgage rules?

August 17, 2020


Effective July 01, 2020, because of the uncertainty of the economy and consumer’s job situations, the government thought it best to further tighten the lending rules for CMHC insured mortgages.

Here are the new rules in a nutshell:

The minimum credit score that a homebuyer has to have in order to qualify for a mortgage was increased.

The debt-service-ratios have been adjusted which means that  amount of monthly payments you make on any debt that you carry (compared to your income) is lower than before.

You can’t top up your down payment using your line of credit in order to lower your mortgage amount anymore (actually you weren’t allowed to do that before either, but banks would sometimes relax that policy on a case-by-case basis).

Any deferred payments as a result of  Covid-19 have to be made whole (caught up on) before qualifying for a mortgage.

These new rules set off a bit of panic buying when they were announced, because people wanted to secure their mortgages before the implementation of these rules. However, the panic buying was quelled significantly when Genworth and Canada Guarantee (private corporations that are CMHC’s direct competition) announced that they are not officially implementing the same lending rules as CMHC.

The bright side of all this, is that banks, in an effort to encourage potential buyers to go out and purchase homes, have dropped their mortgage rates. Today a five year closed mortgage can be obtained at interest rates as low as 1.89%.

Reach out to me if you have any more questions about the new rules, or if you’re thinking about buying or selling a home in this market. If I don’t have the answers, I’ll direct you to the people who do!