Cmhc Mortgage Regulations To Restrict Real Estate Investment


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learn about new CMHC mortgage rules for real estate investors in Canada and Ontario. Buying, selling and investing in property.

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Cmhc Mortgage Regulations To Restrict Real Estate Investment

  1. 1. CMHC Mortgage Regulations to Restrict Real Estate Investment I’ve been hearing rumours recently that CMHC was changing their financing criteria for real estate investment properties. Over the last couple of weeks,we’re heard about raising the minimum downpayment (New Mortgage Rules for Real Estate Investment in Canada) that an investor would need to put down on a rental property (that wasn’t owner-occupied, meaning the owner or a close relative was living there), and that rates will be heading up come July 2010 (Interest rate updates from a mortgage broker). This week I’ve learnt that CMHC is also likely planning to, effective April 19, 2010, change things a whole lots more. Rental Offsets Currently when you buy a rental property, CMHC will allow you to use a 80% rental offset, which means that they used to take 80% of the gross rental income that the income property generated, and subtract that from the borrowers total debt, to establish the total debt service (TDS) ratio. What that means is that you don’t have to have the household income to cover 100% of the value of the rental property, like you do with a home you live in, because the bank will let you offset the debt using 80% of the revenue the rental produces (does that make sense?). They’re tentatively changing this amount to 50%, which makes it much tougher for people to qualify for investment properties, but the real kicker is that… CMHC is also changing how they evaluate the current debt and income on your existing rental portfolio – they are treating the rental income here the same as other non-salaried income too, meaning your current portfolio,
  2. 2. while it generates cash flow every month, might hinder the growth of your portfolio going forward. We also think that most lenders are going to adopt these standards, even for non high ratio loans that are not CMHC insured, just to be cautious. Bottom Line If you qualify under today’s standards for a loan for 1 or 2 townhouses that you planned to rent out and hold as long term assets, come april 19, you may no longer qualify for them. Let’s talk before then so you know all of your options. PS – if we have an agreement of purchase and sale (a real estate contract) dated before april 19, and the mortgage is approved, the rental property can close after (they may set a timeframe, contact me for full details). You don’t have to complete the purchase by april 19, just have the contract written and accepted. If you’d like to talk to a mortgage broker to explore your options, I can recommend one who does a lot of work with real estate investors. 1. What is the Bank of Canada doing with mortgage rates? Many people are speculating that the Bank of Canada will... 2. How will CMHC’s new mortgage rules impact real estate investors in Canada? I was speaking with a long time client today about... 3. What to put in an offer when you’re buying investment real estate A friend of mine asked me this morning what clauses... 4. Interest rate updates from a mortgage broker One of my friends Bev Gay, who owns STS Mortgage... 5. Fixer Upper or Rent Ready Investment Property ? Which would you rather buy ? A Real Estate Investor... 6. Report: Waterloo Vacancy Rate Falls to 1% Canada Mortgage and Housing Corporation (CMHC) just released their Rental... 7. What Student Rental apartment buildings can you buy in Waterloo? …and what return will you get on your money by...
  3. 3. – Related Real Estate Investment Articles: Real Estate Investment Tip: Raising Rent on Rental Units in Ontario Top 10 Reasons to Invest in Kitchener Waterloo Real Estate New Report Released About Kitchener Waterloo Real Estate 3 Things You Should Look For Before Investing in a Condo in Kitchener Waterloo Over the last few years our clients have been investing... Why we invest in Kitchener Waterloo Real Estate Yesterday I had the chance to sit down with two... Kitchener Waterloo Real Estate Market Update – October 2009 September 2009 was a very busy month for real estate... Commercial Real Estate news heard on Twitter Not familiar with Twitter? Twitter is a communication platform where... What happened in Kitchener Waterloo Real Estate in ‘09? This morning we looked at the strong sales the KW... Canadian Real Estate Market Growth Based on Demand An interesting article on the national real estate market in... Market Update: Real Estate selling fast in Kitchener Waterloo “I can’t believe this sold in 2 days – the... Commercial and Investment Real Estate Market Heating Up What a gorgeous day in Kitchener Waterloo – it’s sunny,... CBRE Looks at Canada’s Top Multi-Family Sales in 2009 I was reading a report that CBRE research put out... Commercial Real Estate news around the web Here are some commercial real estate reports and stories I’ve... Changes coming to licensing of lodging and student rental houses in Waterloo? The City of Waterloo recently sent out the Lodging House...
  4. 4. Investment Real Estate Terms: Cap Rate & Cash on Cash Return One of the questions I get a lot is “whats... Benjamin Bach, Sales Representative Director, KW Commercial a division of Keller Williams Golden Triangle Realty 519 772 4376 direct | 519 772 4377 fax 9-871 Victoria Street North Kitchener, ON N2B 3S4 | 519 570 4447 office Not intended to solicit anyone or properties under contract to another brokerage.