Big news for homeowners with secondary suites

A big announcement came from CMHC this week, that will reap big rewards for a lot of homeowners or those looking to buy. Effective in September, CMHC will allow 100% of rental income from legal secondary suites to be used when qualifying for a mortgage, this is up from the current 50% it allows.

CMHC is Canada’s largest default insurer, and says this change will facilitate affordable housing options for more Canadians. The new rule takes effect September 28, 2015, and it is a big deal for current homeowners, investors or those moving into the homebuying market.

“This is definitely good news for anyone who is looking to buy a home and subsidize the cost” with a renter, says Vancouver-based broker Peter Kinch. “…The ability to utilize 100% of the rental income to qualify for the mortgage…can certainly make the difference for many homeowners and may move a larger number of homebuyers from condo purchases to a single-family home with a mortgage helper.” – Canadian Mortgage Trends

This brings about a reminder for clarity on what qualifies a legal suite, it will also certainly fuel the secondary suites debate that seems to be neverending in Calgary City Council. Right now, here are some points CMHC has outlined for its guidelines on legal suites:

• The property must be owner-occupied.
• The property being insured can have only two units
• Rental income cannot be used if the suite is “illegal/non-conforming” but “legal non-conforming” is okay.
• The suite must be self-contained with its own entrance.
• Property taxes and heat must be factored into the borrower’s debt ratios.
• For existing units, there must be two-year history of rental income.
• 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.

Do you have questions about this new development, or the mortgage market in general? Feel free to contact me!

Tags : CMHC, investment calgary r, mortgage broker calgary, mortgage calgary, real estate calgary, real estate investment calgary, secondary suites, secondary suites calgary