Mortgages to Account for 100% of Suite Income

Just recently CMHC came out and said that they are changing their rules.  They announced that they will allow 100% of rental income from a LEGAL secondary suite (Basement suite, coach home, duplex) to be used towards qualifying for a new mortgage.  Up until this point CMHC only accepted 50% of the rental income.  The move was done to help create more affordable housing options for Canadians.  Wh

at is likely to come fro

m this are new construction builds containing legal suites and past owners turning their illegal suites into legal suites before selling. This change will take place as of September 28, 2015.

Curious what rules are needed to qualify?  Take a look:

 

•The property must be owner-occupied.

•The property being insured can have only two units (i.e., a duplex or a single home with a legal secondary suite). 

•Rental income cannot be used if the suite is “illegal/non-conforming” but “legal non-conforming” is okay. (Non-conforming means that the suite was grandfathered in before zoning/regulations restricted such units. You can check with the city to confirm if a suite is legal.)

•The suite must be self-contained with its own entrance.

•Property taxes and heat must be factored into the borrower’s debt ratios (which

is currently not the case when using rent from legal secondary suites).

•For existing units, there must be two-year history of rental income from the suite. The maximum rental income allowed for qualification is a two-year average of the unit’s rent.

•For new units, a market rent appraisal can be accepted if an appropriate vacancy rate has been applied to the estimated rental income.

•Mortgage applicants must “demonstrate a strong history of managing credit” with a minimum credit score of 680.

 


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