NEW LENDING RULES
As many of us know, tighter lending rules came into effect on July 1. These new rules are making it harder for some Canadians to buy homes, however, some mortgage professionals say it’s not a big panic. The Canadian Mortgage and Housing Corporation (CMHC) has reduced borrowing limits, and now require higher credit scores, and restrictive down payment amounts for anyone who needs default insurance (a mandatory insurance for “high-ratio” buyers who are putting less than 20 per cent down on a home). These changes are meant to throw some caution into the borrowing industry, in the age of the corona virus by protecting lenders from people who pose a high risk of defaulting.
Tightening of the lending rules include:
- Borrowers looking for a high-ratio mortgage are no longer able to submit a down payment with money borrowed from credit cards, unsecured personal loans or lines of credit.
- The minimum credit score to qualify went form from 600 to 680. If you don’t know your credit score, you can check it for free online.
- New home buyers are now capped at spending 35 per cent of their gross income (up from 39 %) on housing. That includes the mortgage itself, property taxes and utilities.
What should home buyers do?
If you’re not a higher risk borrower in the eyes of the CMHC, these changes may not affect you at all.
Home buyers excluded from obtaining a mortgage due to these changes should search for a lender that also works with Genworth or Canada Guaranty, the country’s two private-sector providers of mortgage default insurance. Those companies have decided not to tighten their restrictions.
So even if the CMHC thinks you’re a bad bet, you’ll still find a range of lenders that want your business.
Rock Bottom Interest Rates
Today’s rock-bottom rates are predicted to last for at least the next 12 to 18 months, until the economy starts to stabilize from the COVID-19 crisis.
Whether you’re buying or refinancing, it pays to shop around and get the best deal.
Please contact an Area Manager today and ask them how they can help YOU obtain the financing you need to take advantage of the low interest rates!
Article Reference: Finance Post Mortgage Article.