CMHC Mortgage Insurance Rules Changes
Effective Monday, July 9, 2012, the Canadian Mortgage and
Housing Corporation (CMHC) only provides mortgage insurance for loans with an
amortization of 25 years or less when the borrowed amount is 80% or more of the
property value. Canadian law requires
insurance on mortgages that exceed 80% of a property's value.
Amortization - This lowers the amortization limit from the 30 year maximum
set out in 2011. It was as high as a 40
year amortization in 2006, but the amortization period has been lowered by the
federal government over the past several years in an effort to encourage
consumers to pay off debts more quickly.
Debt Ratios - The government has also set the maximum gross debt service
(GDS) ratio at 35% and the maximum total debt service (TDS) ratio at 42% in order to qualify for CMHC
insurance if you have a beacon score of less 680. The ratios are at a GDS of 39% and TDS of 44%
if the beacon score is over 680. We
calculate the GDS by adding up mortgage payments, property taxes and heat costs,
and dividing by the borrower's income. TDS adds in other debt payments such as
lines of credit and credit cards to get total debt payments.
