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.