Message from CMHC’s Steven Mennill Sr Vice-President, Insurance:
Revisions to Homeowner Affordable Housing Flexibilities
CMHC’s mortgage loan insurance products and policies facilitate a range of housing options for Canadians. As such, CMHC would like to inform you of policy revisions related to its homeowner affordable housing flexibilities and the treatment of rental income for borrower qualification purposes.
Revisions to CMHC Homeowner Affordable Housing Flexibilities [PDF download link]
CMHC enables lenders to offer flexibilities to homebuyers and proponents of affordable housing projects beyond those available for the financing of market housing. Proponents can be government agencies, private proponents, sponsors and/or other profit or non-profit groups.
Effective September 28, 2015, revisions to homeowner policies in the areas of down payment assistance, market value requirements, share of equity appreciation and monthly subsidy assistance will be made to align CMHC’s policies with the evolving financing needs of the affordable housing marketplace.
The policy modifications will apply to all proposals for Homeowner Affordable Housing Flexibilities submitted to CMHC, by a proponent, on or after September 28, 2015. The updated “Flexibilities for Affordable Housing – Homeowner Mortgage Loan Insurance” publication will be available on CMHC’s website on the effective date.
Treatment of Rental Income for Borrower Qualification Purposes – Homeowner (1-4 Units)
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.
Effective September 28, 2015:
- CMHC will consider up to 100% of gross rental income from a 2-unit owner-occupied property that is the subject of a loan application submitted for insurance. The annual principal, interest, municipal tax and heat (P.I.T.H) for the property including the secondary suite must be used when calculating the debt service ratios.
- For 3-4 unit owner-occupied and 1-4 unit non-owner occupied properties the net rental income (gross rents less operating expenses) can form part of the borrowers’ gross annual income.
Additional conditions when 100% of gross rental income is used include:
- The income must have been sustained over at least two years.
- The income amount must not exceed the average of the past two years, to address income fluctuations, smooth out cyclical trends and unexpected events such as vacancies.
- Up to 100 percent of gross rental income may be used only where prospective borrowers can demonstrate a strong history of managing credit generally considered to be a minimum credit score of 680.