Wednesday, September 23, 2015

CMHC to consider 100 per cent rental income in loan applications


Canada Mortgage and Housing Corp. is going to make it easier for homeowners renting out apartments in their principal residences to borrow money, a move that could further heat up markets in Toronto and Vancouver.

The Crown corporation, which controls a majority of the mortgage default insurance market in Canada, announced changes to its rules Monday and effective Sept. 28 which are aimed at boosting affordable housing. The changes from CMHC would allow homeowners to count the income from their secondary units when qualifying for a loan, something that would seemingly bring more people into the housing market.

Homeowners with less than a 20 per cent down payment and borrowing from a regulated financial institution must get government backed mortgage default insurance. Even financial institutions not regulated by Ottawa, like credit unions, must abide by CMHC rules to be covered by the government backing.

The agency announced that it will allow 100 per cent of the rental income from a unit to be considered for new loan applications submitted to it for mortgage insurance. That means that a secondary rentals suite’s income, minus costs including property taxes, will boost the size of loan that buyers can secure. Qualifying units must have sustainable income, proven by two years of rental rent payments. These payments will be averaged to assess the unit’s income. Applicants will also need a credit rating of at least 680. Properties with more than a single rental unit will have slightly different rules and this change is most positive for homeowners with one rental unit.

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