On June 4, The Canada Mortgage and Housing Corporation ("CMHC") announced changes to its mortgage requirements for insured mortgages (i.e. purchases made with less than 20% down payment) making it harder for first time home buyers to enter the market. At a high level, the main changes that will be effective July 1 include:
On June 2021, The Canada Mortgage and Housing Corporation ("CMHC") announced changes to its mortgage requirements for insured mortgages (i.e. purchases made with less than 20% down payment) making it harder for first time home buyers to enter the market. At a high level, the main changes that will be effective July 1 include:
A decrease in credit score minimums from 680 to 600
Adjustments to the gross debt servicing (GDS) ratios from 35% of annual income to 39%
Adjustments to the total debt servicing (TDS) ratios from 42% to 44%
CMHC continues to not allow borrowed down payment aside from own money or from a non-repayable gift
What Does This Mean?
It really boils down to one thing: all of these measures will reduce how much individuals and families will eligible for under the CMHC's program moving forward. The new debt-ratios will reduce the purchasing power of home buyers by requiring higher incomes and down payments to afford similar priced houses.
Rate Hub estimates a family with an annual income of $100,000 and a 10 per cent down payment would have been able to buy a home valued at up to $524,980; under the revised rules, that same family can only get approved to buy a home worth $462,860 — a reduction of 12 per cent.
Gross Debt Servicing of 39%
This means all of your housing expenses (mortgage, taxes, utilities, and 50% of condo fees if applicable) will need to be less than 39% of your gross income (i.e. income before taxes). In practice, a household making $100K a year will need to make sure their total housing related expenses are below ~$3,900 a month to be eligible for a CMHC-insured mortgage.
Total Debt Servicing of 44%
This means all of your housing expenses and any other debts obligations will need to be less than 44% of your gross income. Debt obligations typically include student loan payments, fees associate with lines of credit, credit card debt and any other recurring debt payments.
All in all, the changes will make sure first time home buyers aren't over extending themselves with their purchases and will require households to either save more towards a home in the future or consider locations further outside of city centers more in line with their purchasing power.
You can choose almost any move-in-ready home listed publicly or privately, as long as it meets our program criteria.
Eligible homes typically:
Are freehold single-family homes or townhouses
Are connected to municipal water and sewer
Are priced between $150,000 and $600,000
Are located in Alberta, Manitoba, Ontario, or Saskatchewan in communities with established municipal services and a population of 20,000 or more.
In some cases, newly built condo townhouses with reasonable condo fees may be approved. If approved, condo fees are added to your monthly payment.
Homes must be in good condition. Major systems such as roof, furnace, HVAC, and water heater should be within reasonable age limits. All properties are reviewed to confirm they meet our inspection and funding requirements.
We do not purchase rural properties, fixer-uppers, homes sold as-is, or properties with structural or safety concerns.
Once you are pre-qualified, you can tour homes with a partner agent or your own realtor and we will confirm eligibility before purchase.
Depending on the type of income, we will ask for different supporting documents to verify your income. Our goal is to make sure you can afford rent-to-own payments during the lease term.
Traditional employment (Hourly, Salaried or Commission)
Employment letter
Most recent pay stubs
Notice of assessment from the last two years
Bank statements for the past 6 months
Self-employed
T1 general tax returns
T2 corporate tax returns
Notice of assessment from the last two years
Personal & Corporate bank statements for the past 12 months
Pension & Disability Incomes
Proof that such payments are expected to be longer than three years
Alimony & Child Support
Proof that such payments have been made consistently in the past 6 months
What is the interest rate?
There is no interest rate during the rent-to-own term because this is not a mortgage.
When you are ready to buy the home, most clients get a mortgage from a lender to complete the purchase.
As a realtor, mortgage broker, or Requity Homes ambassador, you can now help more community members achieve their homeownership goals while streamlining your workload. Partner with us to expand your impact and create success stories with less work.
On June 4, The Canada Mortgage and Housing Corporation ("CMHC") announced changes to its mortgage requirements for insured mortgages (i.e. purchases made with less than 20% down payment) making it harder for first time home buyers to enter the market. At a high level, the main changes that will be effective July 1 include:
On June 2021, The Canada Mortgage and Housing Corporation ("CMHC") announced changes to its mortgage requirements for insured mortgages (i.e. purchases made with less than 20% down payment) making it harder for first time home buyers to enter the market. At a high level, the main changes that will be effective July 1 include:
A decrease in credit score minimums from 680 to 600
Adjustments to the gross debt servicing (GDS) ratios from 35% of annual income to 39%
Adjustments to the total debt servicing (TDS) ratios from 42% to 44%
CMHC continues to not allow borrowed down payment aside from own money or from a non-repayable gift
What Does This Mean?
It really boils down to one thing: all of these measures will reduce how much individuals and families will eligible for under the CMHC's program moving forward. The new debt-ratios will reduce the purchasing power of home buyers by requiring higher incomes and down payments to afford similar priced houses.
Rate Hub estimates a family with an annual income of $100,000 and a 10 per cent down payment would have been able to buy a home valued at up to $524,980; under the revised rules, that same family can only get approved to buy a home worth $462,860 — a reduction of 12 per cent.
Gross Debt Servicing of 39%
This means all of your housing expenses (mortgage, taxes, utilities, and 50% of condo fees if applicable) will need to be less than 39% of your gross income (i.e. income before taxes). In practice, a household making $100K a year will need to make sure their total housing related expenses are below ~$3,900 a month to be eligible for a CMHC-insured mortgage.
Total Debt Servicing of 44%
This means all of your housing expenses and any other debts obligations will need to be less than 44% of your gross income. Debt obligations typically include student loan payments, fees associate with lines of credit, credit card debt and any other recurring debt payments.
All in all, the changes will make sure first time home buyers aren't over extending themselves with their purchases and will require households to either save more towards a home in the future or consider locations further outside of city centers more in line with their purchasing power.
