How The New Mortgage Qualification Rules Could Soon Affect HomeBuyers

In response to the COVID-19 pandemic and in an attempt to protect the economic future of Canadians, the Canadian Mortgage and Housing Corporation (CMHC) announced in early June that it would be tightening its qualification rules for mortgage insurance from July 1, 2020.  Fortunately, they are two other mortgage insurers: Genworth and Canada Guarantee and neither of them are changing their qualification rules.

The CMHC policy change will only restrict those who want to buy a home with less than a twenty percent down payment, have a credit score lower than 680, and if they will be able to qualify based on a lower limit on gross and total debt servicing ratios. This will mean that some potential homebuyers will have to continue renting due to their inability to qualify for a mortgage.

It may also push those who were working and were on the fence about buying to rush to get into homeownership not knowing there are other mortgage insurer options available through a mortgage broker. The soon-to-be-implemented mortgage rules are created to provide a view to the greater world that our federal government is taking measures to limit personal debt.

The month of June has seen a short-term burst of buying while the month of July will likely see a drop in the real estate sales market as a result of both the policy change and pent up buyers from COVID-19. 

For rental housing providers, the new change will imply that there will be more tenants for longer as tenants may be unable to qualify for a mortgage or the mortgage amount they want, as they will need to increase income or reduce debt to do so. This translates into a greater opportunity for wealth growth by real estate investors as real estate is the most stable investment for long-term wealth growth.

For CMHC, it will lower their insurance portfolio risk and thus that of the federal government. For the other mortgage insurers such as Genworth and Canada Guaranty, it is an opportunity for them to take a greater market share by not following CMHC in these policy changes. 

This policy will end up helping CMHC fulfill its real estate market projections. What better way to ensure your predictions than to influence the market by putting in new policies that will help to fulfill what you predict. In this case, limiting buying power which may translate to fewer sales.

Unfortunately, this means tenants will remain tenants for as long as the federal government continues to create a nation of renters one policy at a time.

As a potential homebuyer, it is evident that it may be much more difficult for you to qualify for a mortgage. Therefore, now more than ever, it is imperative to enlist the services of an expert mortgage broker to help you find out whether you can qualify for a mortgage. 

If you’re looking for a licensed mortgage broker or specialist in Calgary, Alberta, get in touch with Keith Uthe. I represent you, the client, to multiple lenders so that you have the largest selection of lenders, best terms, and the opportunity to achieve your homeownership goal.

I work with many lenders who do not have to use only CMHC as their mortgage insurer. As long as other mortgage insurers do not follow suit on the policy change, I will continue to offer options for High Ratio insured mortgage clients.

For my real estate investor clients, this policy should mean many tenants will likely remain tenants for long, thus making the rental housing provider market stronger. 

As an independent mortgage specialist with Mortgage Alliance Enrich Mortgage Group and a Legacy Certified Real Estate Investment Advisor, I have the knowledge and qualification needed to fulfill my clients’ requirements. By offering my clients quick and effective mortgage solutions, I not only guarantee them results they desire but also enable them to capitalize on growth opportunities to secure their future. 

I provide a range of professional mortgage services to clients across Calgary, Red Deer, Lethbridge, Edmonton, and Medicine Hat in Alberta.

To learn more about the services I offer at Keith Uthe Demystifying Mortgages, please click here. For more information about how this policy change may impact you or if you want to book a free consultation, get in touch with me by clicking here. Alternatively, if you know someone who is considering buying a new home, have them contact me now to discuss their mortgage options.