Thinking of buying a home? You may qualify for less after July 1st.

Here’s what you need to know about the mortgage rule changes happening soon.

You’ve likely heard in the news that the Canada Mortgage and Housing Corporation (or CMHC) is tightening mortgage rules starting July 1st of this year. But what does this mean for you as a prospective homebuyer?

In Canada, any mortgage with less than 20% down must be backed by insurance. Statistics show that about 35% of mortgages in Canada are insured – meaning that these changes impact a large group of homebuyers. Most of these mortgages are backed by the Canadian Mortgage Housing Corporation (CMHC), a government-owned company that provides insurance for mortgage lenders. Two private companies also provide mortgage insurance in Canada, Genworth and Canada Guaranty, and as privately-owned providers they do not follow the same government regulations as CMHC.

Due to economic uncertainty and housing market projections, the federal government (through the CMHC) has increased restrictions on mortgages to reduce their exposure on high-risk mortgages.

What’s changing?

Current RequirementsRequirements as of July 1What This Means for Homebuyers
Credit Score600680Buyers with a credit score below 680 will not be eligible to buy a home without first improving their score by a significant amount.
Gross Debt Servicing Ratio (cost of mortgage divided by annual income)39%35%Under current rules, a family with an annual income of $100,000 and a 10% down payment are qualified to purchase a home valued up to $524,980. Under new rules of 35%, the same family will only be approved up to $462,860. That is a 12% reduction in home value.
Total Debt Service Ratio (cost of mortgage + other debt divided by annual income)44%42%See above, but families with other debts will have their approved amount reduced even further. Families with outstanding car payments, credit card debt, or student loans will be limited in the amount of mortgage they are approved for.
Down Payment SourceCan utilize loaned or financed funds (personal loans, credit cards.Cannot utilize non-traditional sources of down payment.Homebuyers will be unable to use alternative sources for down payment, reducing their approved mortgage amount.

Although these changes impact CMHC-backed mortgages, Canada Guaranty and Genworth Canada have stated they will not be adopting the new rules.

If you’re not sure if any of the above applies to you, contact an insurance broker and find out before the new rules are enacted on July 1st, to determine if your home-buying journey will be impacted and to what extent.

If you’re looking to take advantage of the current rules, check out Cameron Homes move-in ready homes across Edmonton to find your dream home this summer.