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CANADIAN MORTGAGE INSURANCE HAS CHANGED. WHAT DOES THAT MEAN?
Canadian Mortgage and Housing Corporation (CMHC) is most known for insuring mortgages for anyone who does not have a 20% down payment to qualify for a conventional mortgage. The federally regulated banks are required to have mortgage insurance for a mortgage that is less than 20% down. For example, first time home buyers can use a down payment of 5% to obtain a mortgage from the bank because CHMC will insure them. Without the insurance from CMHC the bank will refuse the loan. On June 4 2020 CHMC released an announcement that effective July 1 2020 they will changing their criteria on who can obtain mortgage insurance. Yes, these requirements are getting stricter but what does that mean to you? Can those who used mortgage insurance before be able to afford a mortgage without insurance? Why did this happen? According to the official releasethis is strictly a result of COVID-19. Unfortunately, the virus has affected everyone in the entire world and CMHC believes that this is the best way we can avoid a bunch of people defaulting on their mortgage in the next few years. CMHC believes that we will see long term effects of COVID-19. They believe that more people will lose their jobs and house prices will decrease in the upcoming year. Basically, this is what they are thinking: Stricter mortgage requirements = lending to a more stable borrower = less chance they default on their mortgage payments So what changed? 1. Debt Service Ratio When trying to obtain a mortgage there are many things a mortgage agent and lenders look at. Two ratios we look at are Gross Debt Service (GDS) and Total Debt Service (TDS) relative to your income. GDS Gross Debt Service The GDS is basically Can you afford this house. It is all the monthly house expenses (mortgage payment + taxes + heat) divided by your monthly income. CMHC previously allowed the cost of someones monthly house expense to take up a maximum of 39% of their monthly income. Now with the change the maximum percentage your monthly housing expense can be is 35%. For example, if you made $4000 a month, under the old rules you would afford a monthly payment of $1560. Now with the same monthly income you can only afford a payment of $1400. You already lost buying power without factoring your credit score, other debt and the house itself! TDS Total Debt Service TDS is similar to GDS but considers all outstanding debt. TDS is the percentage of your income needed to cover all your debt. To calculate you take all your monthly debt payment (including mortgage payments) and divide it by your monthly income. They are decreasing the maximum percentage of all your debt payments per month from 44% to 42% We will use the same example of a monthly income of $4000 again. The previous requirements you can afford a monthly payment of $1760. As of July 1st you can only afford $1680. Again, not factoring many things like the down payment credit score or the actual property. 2. Minimum Credit Score The second important change is that each application is required to have at least one person with a credit score of 680. Before you can have a credit score of 600 and was able to obtain mortgage insurance through CMHC. To put things in perspective, 650 is the credit score TD will consider your application, whereas 680 they will start easing their maximum GDS and TDS. 3. Down Payment This one is simple you cannot borrow your down payment. Any down payment that needs to be paid back will not be insured by CMHC. You will still be able to use gifts if it is not expected to be paid back. What can I do now? CMHC may be the first thought that come to your head when you think of mortgage insurance. But it is not industry standard. Just like purchasing auto insurance you have multiple options available to you. Genworth and Canada Guaranty are probably the second biggest names in mortgage insurance. They released that they will not follow CMHC and will keep their requirements the same. Which means that options are still available. Here at Sunlite Mortgage we have access to all these options and can find something that will sit you. Dont delay and contact us today!
Almost one-quarter of Canadian seniors are caregivers
While older Canadians may be more likely than their younger counterparts to require help and care in their daily lives, almost one-quarter of Canadian seniors aged 65 years and older are caregivers themselves. And while the roles and responsibilities of these senior caregivers may have changed in the context of the COVID-19 pandemic, the challenges they face could be heightened. Although the pandemic has affected the lives of all Canadians, seniors have been identified as a population particularly vulnerable to COVID-19. Not only are seniors more at risk of severe illness, they are also more affected by isolation measures. As a result, many senior caregivers who help people living outside of their household may not have been able to provide the same level of care that they usually do. Senior caregivers providing help to their spouse may also have seen their burden of care increase, given the possible lack of other support during the pandemic. For example, older caregivers who are usually supported by their adult children to provide help and care for their spouses, may have had to perform additional activities and provide more hours of care than usual. While the data in the current study were collected prior to the COVID-19 pandemic, the results highlight the many challenges senior caregivers already faced. A new study, The experiences and needs of older caregivers in Canada, uses data from the 2018 General Social Survey on Caregiving and Care Receiving to provide a profile of senior caregivers in Canada. Senior caregivers are those who have provided help or care to a spouse, another family member, or a friend with a long-term health condition, a physical or mental disability, or problems related to aging. Senior caregivers are likely to continue to play an important role in the years to come. As the needs for care and help increase with an aging population, smaller families and geographic mobility among Canadians may reduce the supply of potential younger family caregivers. Within this context, many older Canadians may be relied upon to become care providers, even though they may develop health issues of their own, including age-related physical and cognitive declines, chronic illness and some level of disability.
Week in review
Real GDP continued to recover in August, gaining 1.2% m/m, a result above the +0.9% print expected by consensus. This marks the fourth monthly gain in a row for this indicator, however total output is still down 4.6% from its pre-pandemic (February) level. Production rose in 15 of the 20 industrial sectors covered in August, with two others remaining flat in the month. Goods sector output climbed 0.5% on decent rises for construction (+1.5%) and manufacturing (+1.2%). Industrial production edged up 0.1%. Services-producing industries, meanwhile, experienced a 1.5% surge in production, with the steepest progressions occurring in arts/entertainment (+13.7%), accommodation/food services (+7.3%) and educational services (+3.4%). Year on year, total economic output was down 3.8%. Canadian GDP registered yet another advance in August but the economic recovery remains highly uneven. Some sectors have now fully recovered from the COVID-19 shock and currently stand above their pre-pandemic peaks. That is the case for agriculture/forestry/fishing/hunting (+2.5% compared with February), finance/insurance (+2.1%), real estate (+1.5%), wholesale (+1.3%), retail (+1.2%) and utilities (+0.8%). That said, certain industries continue to suffer. For instance, production in the mining/quarrying/oil and gas extraction segment remains 17.2% below its February level thanks in large part to depressed energy prices. The sectors most affected by social distancing measures are also struggling to recover. Output in the arts/entertainment segment is roughly half what it was before COVID. Production in accommodation/food services, meanwhile, remains 28.2% short of pre-pandemic levels. Transportation and warehousing is also tracking 20.5% below February. While the economic rebound is likely to have extended into September Statistics Canada advance estimate suggests production expanded another 0.7% in the month the steep gap between the best and worst performing industries is likely to endure in a context in which people continue to avoid social contacts. Looking further ahead, the real question remains whether the recovery can be sustained, especially now that COVID-19 cases are surging back up, forcing some provincial governments to reintroduce social distancing measures.