Old rule : Buyers with good credit scores and reliable income could spend up to 39% of their gross income on housing (including their mortgage, property tax, heating bill and half of condo fees) and could borrow up to 44% of gross income once credit card, car payments and other loans are included. Change 1: Less debt as a percentage of gross income The combination of higher mortgage debt resulting from mortgage deferrals during the pandemic, together with CMHC’s forecast of declining house prices and increased unemployment “is cause for concern for Canada’s longer-term financial stability,” he added-making the rule changes necessary. In his testimony to the Finance Committee, CMHC CEO Siddall warned that Canadians were already “among world leaders in household debt” before the pandemic, which is set to push indebtedness levels higher still. They also follow the Bank of Canada’s move to lower target interest rates -which influence mortgage rates and thus decrease the cost of borrowing-three times in March. The changes come as the CMHC is predicting a drop in average housing prices of between 9% and 18% over the next 12 months, as outlined in Siddall’s speech to the House of Commons Standing Committee on Finance in late May 2020. Siddall says the new rule changes will stabilize housing markets by reducing demand and putting a damper on “unsustainable housing price growth.” Changes are designed to provide housing market stability as CMHC predicts price drops Some properties, including those with a purchase price of $1 million or more, are not eligible for CMHC insurance. If a buyer has a down payment of less than 20% of the purchase price, mortgage default insurance is required, and is paid by the homeowner. Just close the tab to return.ĬOVID-19 “has exposed long-standing vulnerabilities in our financial markets, and we must act now to protect the economic futures of Canadians,” said Evan Siddall, CMHC’s President and CEO.ĬMHC provides insurance that protects lenders if homeowners default on their mortgage. I'm buying a home I'm renewing/refinancing You will be leaving MoneySense.
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