Impact of new CMHC mortgage qualification rules

CMHCHow will new CMHC qualification rules impact me?

CMHC says that after April 19, 2010, mortgages with less than 20% down (a high ratio mortgage) and for terms less than 5 years will have to be qualified based on the 5 year fixed interest rate that the Bank of Canada posts weekly.

If a borrower wants a 5 year mortgage contract fixed or variable rate then lenders can qualify them based on their best 5 year fixed discounted rates.

So what does that do? It makes the 5-year fixed rate mortgage the easiest to qualify if the borrower has tight debt servcing ratios.  It does tighten things, however. You will no longer be able to qualify based on lower interest rate products such as variable rate mortgages or shorter fixed-rate terms.  The government's logic is that they want mortgage payments to remain affordable if and when mortgage interest rates do go up. 

CAAMP estimates that 30% of home buyers choose a 1- to 4-year term. With this new qualifying rate, some of those people will be forced into a 5-year term (and a very small number will no longer qualify at all).

The GOOD news is that 5% remains the minimum down payment requirement. There was plenty talk by the government about increasing the minimum down payment to 10%, which would have been terrible for many first time home buyers.