CMHC Announces More Changes.
CMHC has implemented more mortgage changes, again further limiting potential approvals for customers. Since 2008, Canada’s largest mortgage default insurer has been looking to reduce risk exposure and continues to tighten policy.
The latest changes were outlined in a recent announcement that they will not be insuring 2nd homes with a downpayment of less than 20%, and self employed borrowers will no longer qualify using third party income documentation (using more income than is declared on personal income tax – for example, tips). Both changes are going to affect certain segments of the mortgage population. Small business owners who write off expenses each year will likely be affected, as this influences net income on tax documents. Fortunately, Canada has two other mortgage insurers (Genworth and Canada Guarantee) and they have – so far – stated they will continue to insure these types of borrowers.
How does this affect you? Banks have to abide by the insurer’s guidelines, along with their own guidelines. So, if a particular bank only uses CMHC to insure their mortgages, then you’re limited by what they will do. Knowing which banks use which insurer – and in turn have the most comprehensive qualifying guidelines – is absolutely essential. This is where an independent Mortgage professional is so valuable. We know which bank has the qualifying guidelines you need to achieve your goals. This goes for all aspects of qualifying, not just these two recent changes.
The mortgage lending landscape is changing very quickly and having options and the knowledge of qualifying guidelines can mean the difference between approval and decline. Don’t leave it in the hands of one bank! Use a broker and give yourself the best chance for approval every time you look to purchase or refinance.