Industry welcomes CMHC change

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The crown corporation announced its most recent mortgage rule change Monday and it’s one, for a change, that will likely be welcomed by brokers.

“In an environment where there has been nothing but tightening of rules, any positive change is welcome,” Ron Butler of Verico Butler Mortgage told MortgageBrokerNews.ca. “The average salaried person who wants to invest in rental properties will benefit.”

CMHC announced Monday that it will now consider 100 per cent of gross rental income from a two-unit owner-occupied property when an owner applies for insurance. The crown corporation will consider annual principal, interest, tax and heat on the second unit when calculating debt servicing ratios.

And according to Butler, both buyers and renters will benefit.

“Any improvement that makes the formula more liberal is good; it allows more people to buy rental properties and there is a distinct need for rental properties in the GTA so it’s all positive,” he said. “I think that may even be the CMHC’s whole point – there is a need for rental property inventory in the GTA.”

It’s a decision that will positively impact housing affordability – especially in the red-hot Toronto and Vancouver markets.

“Secondary rental suites are recognized as a source of affordable housing offered at a cost that is often lower than those for apartments in purpose built rental buildings,” CMHC said in a notice on its website.

 
  • LanceH on 2015-07-29 11:09:19 AM

    The crown corporation will consider annual principal, interest, tax and heat on the second unit when calculating debt servicing ratios.

    I find the above stmt a tad confusing, as it's "owner occ", so what do they mean ". . . on the 2nd unit"? Isn't the PIHT the same for both units? It's just one house. Since when is the bsmt apt taxed or heated separately? I can assure you, I don't have a separate furnace for my bsmt apt! Am I misreading?
    Misunderstanding?

    That aside, I think it helps the 1st time buyers get into a ppty in the expensive districts, though some will argue this simply buoy's the high prices.

  • Claire Drage on 2015-07-29 12:16:38 PM

    Ron is right - any change like this is a benefit for sure. Few points to add though is that we will have to wait and see if the lenders will adopt this guideline. There is also VERY specific restrictions (owner occupied duplex, 2 year past history of rent on 2nd unit required!!, 680+ beacon score) etc. The challenge maybe that on a purchase (which is the logical time to use this and pay the insurance premium), will the lender accept the current lease as proof of two year history and how easy will it be to get proof of two year history from the current sellers). It is definitely going to help some for sure though so I am all for some positive news

  • Jerry Quigley on 2015-07-29 7:36:17 PM

    Trust me, I'm a very positive person, however this seems to fly in the face of the governments desire to find ways to reduce mortgage debt, especially in the Toronto & Vancouver markets. Very strange.

  • james on 2015-07-30 10:52:36 AM

    yawn.

  • Ross Kay on 2015-08-03 3:44:39 PM

    The concern our firm had with this decision was over Capital Gains tax on the portion of the home being rented. Once a CMHC mortgage is applied for with that rental component part of the application, the opinions we received from CPAs was CRA now has you on record before you even buy the home that it was at least partially for rental purposes.

    Any MB or REALTOR who suggests these rental incomes be used to secure financing should suggest their clients talk to their tax advisor before making this disclosure on a mortgage app.

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