in Mortgage Financing by David Iverson

Are you trying to find affordable housing options in Kelowna [or in the Okanagan]? But you are having no luck with the very few choices that are available on the current market… Well, maybe you should consider purchasing a home with a secondary suite.

According to a recent announcement by the Canadian Mortgage and Housing Corporation (CMHC), it will be making policy revisions on how they consider income derived from secondary suites. Many Canadians have been having difficult securing mortgage financing for the last 4 years due to the stricter rules around secondary suite income.

With these new policy revisions that will soon be in place, CMHC will now factor in 100% of rent paid (with limited conditions) instead of using only 50% of the income derived from a secondary suite like in the past.

As of September 28th, 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. When calculating debt services ratios, one must consider their annual principal, interest, municipal tax, and heat (P.I.T.H) for the property, including the secondary suite.
• And the net rental income (gross rents minus operating expenses) will be considered as part of the borrowers’ gross annual income for 3-4 unit owner-occupied and 1-4 unit non-owner occupied properties.

Further conditions when 100% of gross rental income is used include:
• Income must have been continuous over the most recent 2 plus years.
• Income amount can’t exceed the 2-year average in order to address income differential, even out cyclical trends, vacancies and unexpected events.
• Up to 100% of gross rental income may only be used if prospective borrowers can validate a strong history of managing credit [minimum credit score of 680].

In the end, what does this mean for you?

If you are interested in entering the housing market, this announcement provides an option that you may not have previously considered. Why not take a look into buying a property with a legal secondary suite in order to use the income to help pay your mortgage? This could be a great idea for getting into the housing market, especially with CMHC making it a little bit easier for individuals to qualify for buying properties with secondary suites.

If you would like to discuss how much mortgage you qualify for or look at various situations of qualifying with a secondary suite rental income, then contact David Iverson for mortgage broker advice. Hope to talk soon.

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