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CMHC Drops 100% Financing and 40-Year Amortizations

This will be a big surprise to many.  The Department of Finance has just announced that it will no longer back the following:

  • 100% financing (5% will now be the minimum downpayment on an insured mortgage)
  • 40 year amortizations (35 years will be the new maximum on insured mortgages)

The government will also require the following with all new mortgages it backs:

  • A new 620 minimum credit score requirement
  • 45% maximum TDS ratio
  • New loan documentation standards

The new rules will take effect October 15, 2008.  This affects CMHC insured mortgages as well as mortgages insured by Genworth, AIG, etc.  Insured mortgages are generally those with less than 20% down.  Certain conventional mortgages are also insured, however.

In a statement earlier today, the Department of Finance said, "Today’s announcement marks a responsible and measured approach by the
Government to ensure Canada’s housing market remains strong and to
reduce the risk of a U.S.-style housing bubble developing in Canada."

These new rules pertain only to new, government-backed insured mortgages.  This will not affect existing mortgages.