CMHC - valuable tools for the homeowner

As many of you know, putting down less than 20% on a mortgage usually means you must get your mortgage insured through CMHC, Genworth, or now Canada Guaranty. What many people don’t know, however, is just who CMHC is and how much valuable information exists on the CMHC website for you, as either a potential or current homeowner.

I could give you a rundown of CMHC’s history, but instead will point you to the wikipedia entry which has all the information you would want to know about them.

As for the information I consider valuable, check this out:

Their @home newsletter is and you can sign up anytime.

They have a great resource section for homeowners. Everything from maintenance, repair, cleaning schedules (dreaded Fall one is coming up), to landscaping, and energy efficiency. Things we either forget about, or put on the “to do” lists that rarely get done.

Resource section is here:

Have a peek and let me know if you have any questions.


Business for Self? Meet Genworth. Genworth, Business for Self.

Prior to the April 19th 2010 change in mortgage rules qualification, self-employed clients would be a prime market for buyers (and refinance clients) for me. Then the credit crisis happened, and the Government of Canada (over)reacted to the inherent risk of this type of client base, and essentially has shut them (us) out from the mortgage market with great efficiency.

To recap, here’s the CMHC rule for “stated income” people: If you are business-for-self for greater than 3 years, your REAL NET income goes towards qualifying your mortgage. If you are a client of CMHC, and want to port or refinance, and you fall under this, there is no grandfather clause. If you are BFS for less than 2 years, you’re not getting a mortgage through CMHC, either.

So let me introduce you to Genworth Financial. Genworth is a competitor to CMHC, and although it operates with similar guidelines, one major difference is their BFS / Stated Income policy. For Genworth, the rules are simple:

  • 2+ years of Business for Self by way of a business licence or articles of incorporation.
  • “reasonability” of income
  • beacon score of 680+
  • Notice how there’s no limit to the number of years? This is a great move by Genworth, and one that has meant I am sending all my BFS clients to this insurer, instead of CMHC.

    (A note on reasonability: just to give you an example, the insurer does not “look” at financial documents, but does want to know the gross and net incomes, to prove reasonability. Example: a truck driver’s income can fall into a certain range, but Genworth may want to know more info about the routes/truck he has/contracts, to determine if that amount is reasonable or not)


    The OECD report

    The Organization for Economic Development and Co-operation (OECD) released a report this week about our Canadian economy, with a focus on our housing market. Some important questions arose from the report, including Did the Bank of Canada fuel the runup in housing prices? and does the Government need to intervene to tighten lending?

    Personally I do not think that raising the minimum down payment to 10% would be in the best interest of Canadians, especially when our lending guidelines are strict enough already, and we have already seen some changes this past April with refinances being capped at 90% and business-for-self buyers being limited to 15% down, at least. What I am trying to say is that if I have an employee of a F500 company who earns good money, has good tenureship, and has managed to save 5% down for a first-time purchase of a condo, because they’ve been paying off their student loans, for example, why should this client not be able to buy with 5% down? Include the Toronto Land Transfer tax, and suddenly a minimum 10% down works out to be closer to 13% for those who are not first-time buyers. Further, why should we limit those who are buying for a second time with a higher down payment? There are so many cases where reducing the downpayment (and using the funds available for debt repayment, for example), makes perfect sense for the client and the deal still “works”.

    Are Canadians carrying too much debt? Absolutely. As the following chart shows, we are indeed at a critical point in our debt load:

    This, from


    RBC’s Rate Capper

    Royal Bank of Canada launched a new rate-capper variable mortgage which I feel won’t give you many benefits. Much like with the 50/50 mortgages, where you’re on the fence for variable and fixed, the rate-capper is a bad deal simply because it plays into the fear many people have that rates will spike too much, too fast.

    If rates exceed 5%, then it’s a solid deal. However, most banks now offer Prime - .65/.70 on a discount. Assuming the discounts don’t decrease, Prime has to jump from 2.75% to 5% in order for you to lose out (since your effective rate would be 4.3% and the cap is 4.15%).

    Truth be told, very few people know what the Bank of Canada will do in the future, how much rates will go up etc. One thing is certain, our Central Bank is the only one in the world to have raised rates thus far.


    Prime Rate Update

    On Wednesday September 8th we will know whether the Bank of Canada has raised its lending rate by a quarter point. There has been much speculation but I am of the belief that we will see another quarter point jump tomorrow.

    As is evident by this chart the rate has been quite low for the past 12 months, and nobody is expecting it to remain there moving forward. The key question the BoC has to answer is how much/how fast can rates go up, especially when no other Central Bank has raised its rates.

    My assessment is that even an eventual 1% jump in Prime (to 3.75%) would still give us an excellent lending rate, and we can see a further discount to prime - rate mortgages (currently -.70 is the standard).

    I will update the blog tomorrow with what ended up happening.


    Two Predictions - Who Is Right?

    Two reports came out this week about our housing market’s future, and it’s impossible to declare who is and isn’t right or wrong. I tend to rely on the CD Howe’s Report that Canada is not as susceptible to the Great American Housing Crash due to much tighter lending guidelines set forth here (and further reduced in April by the Government of Canada). The other report by the Canadian Centre for Policy Alternatives gives three potential predictions but is much more emphatic that we’ll see a crash of some sort.

    The trick is; how do you define the word crash?

    Personally speaking if prices in Toronto fall by over 20%, I would define this as a market crash. How likely is this to happen? I am unsure, but not of the opinion it can’t happen, just feel that it won’t.


    Credit - Quick And Easy Guide And Tips

    One of my favorite shows is Til Debt Do Us Part on Slice Network, mainly because of its no-nonsense host, Gail Vaz-Oxlade (who by the way, also has one of the most unique sounding names in all of television). The show is an excellent look into so many financial mistakes that I also see on a daily basis: over-spenders, bad money management, poor credit history, to name a few. Yet, with some simple steps (and a LOT of willpower), many Canadians could vastly improve their financial situations. Ms. Vaz-Oxdale recently wrote out some tips to building AND keeping good credit which I wanted to share with you, and add a couple:

    * to drastically improve credit, pay your balances down by 50% of the limit. If you have a beacon score of the low 600s, and do this, you’ll see an improvement.

    *checking credit on Equifax Canada gives you three options. Select the most expensive called SCORE POWER, because it’ll give you the most comprehensive explanation of what’s going on in your credit.

    One question I get often asked is “will you checking my credit impact my score?” and the answer is yes, with a “BUT”.

    Yes, it will impact it. If I’m in a long line of brokers who have recently checked it, it means you’re shopping around and probably have low credit to begin with. If, however, your credit is rarely checked, your payments are made on time, etc., it’s safe to say the 1 point (or so) hit won’t impact you at all.

    Also, without me checking your credit, I’ll never know (and nor will you), just how much you really will qualify for,…

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