6 June 2014

The Corporation also supports the government’s attempts to restrain growth of taxpayer-backed mortgage insurance, as it’s written in Economic Action Plan 2014.

While Multi- unit condominium construction insurance changes are affecting mostly builders, new low-ratio mortgage insurance restrictions will have an impact on some (not many) regular borrowers purchasing a home with more than 20%.

CMHC Insurance for Low-Ratio Mortgages

• Mortgage loan insurance is not required if you have 20% or more down payment. Nevertheless, some banks may buy it as a part of your loan approval process.
• The new rules to CMHC’s low-ratio insurance align this product in order to help Canadian borrowers meet their real estate needs – just as the government’s parameters for high ratio mortgage loan insurances.
• Loans outside these parameters accounted for approximately about 3% of CMHC’s total homeowner business insurances last year. As a result, these changes will hardly have a significant influence on the housing market or on CMHC’s future.

In other words, here’s what will happen starting July 31, 2014:

• The maximum Purchase Price (Lending Value) should be less than $1,000,000
• The maximum amortization period will be 25 years
• The maximum Gross Debt Service (GDS) – 39%
• The maximum Total Debt Services (TDS) – 44%
• Note, that these changes do not affect CMHC’s portfolio insurance products.

We are waiting for comments from Genworth and Canada Guaranty and hoping that they will not follow CMHC suit and continue to offer extended amortization on conventional mortgages.