New CMHC rules!

Big changes are happening in the market! Finance Minister Jim Flaherty outlined new rules effecting High Ratio mortgages (CMHC, Genworth Financial, Canada Guaranty)
1.     Maximum amortization is 25 years opposed to 30 years
2.     Maximum refinance is 80% whereas previously this was 85%
3.     Maximum GDS is 39% and TDS is 44%
4.     Maximum purchase price is $1 million (High Ratio deals only)
 

The changes will become effective July 9, 2012

The reduction in amortization combined with the lowered GDS ratio could affect a number of people’s ability to qualify.  It will also decrease their desire to buy.  Historically, the TDS of True North Mortgage clients is around 32%.  However, 5% of our clients do have 40+ GDS.
The maximum purchase of $1 million could be the largest hindrance to our consumers.  Due to the reduced ability of clients to get financing on these more pricey homes we will likely see a drop in those home values.  Furthermore, on non-high ratio deals, lenders will be very hesitant to go to 80% for fear of the loss of liquidity in the higher end market.  I would imagine that lenders will place a self-imposed 75% cap on the larger mortgage sizes in the near future.
More changes other than the new guidelines outlines above for CMHC Mortgages:
As expected we will likely continue to see additional changes over the next 3-6 months from various financial institutions.
 
FUTURE CHANGES TO PRODUCTS:

• Cash-back for down payment mortgage’s (also known to some as zero down mortgages) will no longer be allowed.
  • If you are a buyer that requires the cash back mortgage or are slightly short on your 5% down payment,  you should get pre-qualified ASAP.
  • A home must be purchased or have a conditional offer prior to July 9^th 2012 to obtain the cash back for down payment.  Latest possession date will be determined shortly.

• Home Equity Credit Line’s (HELOC) will be 65% max of a client’s property
  • Effective change for August 31^st
  • This is for both new purchases or equity take out’s.
  • HELOC’s are especially popular for investors, if you have a revenue property, and short term financing solutions.
  • These are interest only monthly payments. The rates are typically less then open mortgages so these are very popular.
  • This effects an individual’s liquidity and the government’s goal is to encourage home owners to keep equity in their properties.