This is the second information update implementing new parameters for mortgage loan insurance announced by the Government of Canada on October 3 and updated on October 14, 2016.
The earlier update dealt with the application of the Mortgage Rate Stress Test applicable to high ratio loans. This information update deals with new eligibility criteria for low ratio loans where the loan-to-value ratio is 80% or less.
Eligibility Requirements where the Loan-to-Value Ratio is 80% or LessEffective November 30, 2016, transactional low ratio loans must meet seven new eligibility requirements. The additional requirements are as follows:
Loan PurposePurchase of a residential property. No Refinance.
Maximum Amortization25 years from when the loan was originally made
Maximum Purchase PriceLess than $1,000,000
Variable Rate LoansFor variable-rate loans that allow fluctuations in the amortization period, loan payments that are recalculated at least once every five years to conform to the established amortization schedule.
Credit ScoreAt least one borrower (or guarantor) must have a minimum credit score of 600.
Debt Service Guidelines (GDS/TDS)Max 39% / 44% calculated by applying the greater of the mortgage contract rate or the Bank of Canada conventional five-year fixed posted rate.
OccupancyIf the property is a single unit, it will be owner occupied.The eligibility requirements also apply to transactional low ratio loans received by CMHC before November 30, 2016. To determine if the new low ratio eligibility requirements apply, please refer to the table below:
Before October 17New eligibility requirements do not apply where one of the following applies:
- CMHC received an application to insure the loan; or
- The lender had already made the loan or made legally binding commitment to make the loan; or
- The borrower entered into a legally binding agreement of purchase or sale for the property against which the loan will be secured.
October 17 to November 29New eligibility requirements do not apply if one of the three above criteria is met and the loan is funded before May 1, 2017.
If the loan is to be first funded on or after May 1, 2017, the new eligibility requirements apply.
November 30 onwardsThe new eligibility criteria apply.