Agents applaud CMHC rule change for self-employed

by Jordan Maxwell on 29 Jul 2015
Canadian investors who are self-employed and looking to claim rental income in order to qualify for a loan will have more freedom to do so come Sept. 28, something that agents with those clients applaud.

“It will certainly help that segment of buyers because it’s well-known that it’s a challenge for those who are self-employed to qualify for a mortgage,” Davelle Morrison, a real estate agent with Bosley, told REP. “A lot of self-employed people spend a lot on expenses and don’t count income all the time so when the lenders see that, they tend to deny them.

“This rule change gives them another avenue to prove their have significant income coming in.”

Any investor looking to take advantage of this option will have to possess a Beacon score of no less than 680 while anyone who puts less than 20 per cent down will have to secure mortgage default insurance.

According to the new rules, the CMHC will consider up to 100 per cent of gross rental income from a two-unit owner-occupied property that is the subject of a loan application submitted for insurance. The annual principal, interest, municipal tax and heat for the property, including the secondary suite must be used when calculating the debt service ratios.

For three- to four-unit owner-occupied homes, the net rental income (gross rents less operating expenses) can form part of the borrowers’ gross annual income, according to the new rules.

Brandon Sage, a real estate investor with Landlord Property and Rental Management Inc., said that not only will this help those who are self-employed but also first-time buyers looking for affordability because they’ll be see the balance on their mortgage payments reduced from rental income.

“It’s good to a see an effective policy that will mostly see the interest in multi-family units rise as immigration and general population increases,” Sage told REP. “It could also drive prices higher in the long-term but this move gives people another option to enter the market affordably.” 

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