CMHC Rule Tightening Comes into Effect

Date Posted: July 6, 2020

Effective July 1^st, 2020 CMHC's proposed changes to their underwriting practices have come into effect, which now will make it more challenging for Canadians looking to borrow money for a home purchase.

The changes that were implement over the weekend included:

1)  Reducing the maximum gross debt service ratio (GDS) from 39 to 35.

2)  Reducing the maximum total debt service ratio (TDS) from 44 to 42.

3)  The minimum credit score increases from 600 to 680 for at least one borrower on the mortgage.

4)  Non-traditional sources of down payment (i.e. borrowed from a line of credit or credit card) will not be treated as equity for insurance purposes.

These changes apply to home buyers that are purchasing a home with less than 20% down payment where the default insurance is provided by CMHC.

However, both Genworth Canada and Canada Guaranty have confirmed they are not making the same changes to their underwriting practices as CMHC, thereby still providing Canadians with options when it comes to purchasing a home with less than 20% down payment.

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