Category Archives: CMHC

Everything you need to know about CMHC’s First-Time Home Buyer Incentive

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The federal government wants to make home ownership more affordable for young people and to do that it’s introducing the First-Time Home Buyer Incentive (FTHBI) this September. The $1.25 billion program, announced as part of the March federal budget, involves the government buying equity stakes in homes purchased by qualified home buyers, allowing for smaller mortgages that will keep monthly payments lower.

But how will the plan work? Below, we break down all the key details and take a look at who this new program is right for.

How the FTHBI works

The program will be administered by Canada’s housing agency, Canada Mortgage and Housing Corp. (CMHC), which will pay 5% of the purchase price for an existing home, and up to 10% for the value of a new home, in exchange for an equity stake. Once the homeowner sells, they’re obligated to repay the CMHC.

The fine print includes the following:

  • To qualify, you must be a first-time home buyer.
  • Buyers must have a down payment of at least 5% of the total purchase price, up to 20%.
  • The household’s income must be under $120,000, and the mortgage and incentive amount together can’t be more than four times the household income.
  • Only insured mortgages will be eligible, meaning this will be restricted to those with a down payment worth less than 20% of the purchase price.
  • Buyers will not be exempt from federal “stress test” regulations (a mandatory mortgage qualification using the five-year benchmark rate published by the Bank of Canada or the customer’s mortgage interest rate plus 2%)

Who is this for?

The program is for purchasers looking for a starter home but aren’t able to afford the monthly payments needed for a mortgage below $500,000. To qualify for mortgages in the $400,000 – $500,000 range, the household income would have to be close to six figures. Buyers would have to be willing to give up at least 5% of the value of their home to the federal government in exchange for lower monthly payments.

As an example, a couple earning up to the household income cap of $120,000 with a down payment of 5% on a new home would be entitled to an additional $48,000 provided by CMHC, as below:

Couple earning $120,000
$480,000 total purchase
-$24,000 down payment
-$48,000 matched by CMHC (10% for a new home)
= $408,000 mortgage

As both the household income and total purchase price are capped under the program, it’s worth noting that buyers with good credit and low debt might actually be able to borrow more money than the FTHBI would allow.

In this scenario, “the program forces you to buy less home than you otherwise would be able to. Whether consumers are disciplined enough to take part of that or not is the real question,” says Paul Taylor, president and CEO of Mortgage Professionals of Canada.

Buyers in the program will also want to consider the future value of their home over time. Is the neighborhood likely to increase in value? With a 5-10% equity stake in the home, CMHC will be along for the ride, both in the case of depreciation or appreciated value of the home.

“Vancouver North Shore is a great example. Now, it’s very much an outlier but if you bought the home in 1986 for $250,000 it’s probably worth $4 million now,” says Taylor.

Comparing markets

The most expensive home you can buy would be about $565,000 a government official told the CBC, which all but disqualifies purchases of detached homes or upscale condos in downtown Vancouver and Toronto. For example, the average home price in the Greater Toronto Area as of May 2019 was $838,540, according to the Toronto Real Estate Board.

CMHC acknowledged earlier this year that the average home in these markets won’t be within reach.

“It may not be a condo in Yaletown or a house in Riverdale, but there are options in both metropolitan areas to accommodate this program,” CMHC said in a press release in April. “In fact, around 23% of transactions in Toronto are for homes under $500,000 and 10% in Vancouver.”

This means that potential buyers will want to be comfortable living in the outer suburbs like Langley or Surrey in Vancouver, or Brampton and Mississauga in Toronto.

Recent residential listings for $472,000 (the average price for a home in Canada) 
*Compiled using listings found on during the week of May 26th

Downtown Toronto Less than 30 listings
Downtown Vancouver Less than 100 listings
Calgary More than 600 listings
Winnipeg More than 2,000 listings

The program would seem to favour first-time buyers in smaller cities across Canada, at least when comparing options for buyers that tend to want to live in large cities downtown.

What you get for $490,000-$505,000

While this program can get you property up to $565,000 if you put the maximum down payment allowed for an insured mortgage (about 19.99%), we expect many who use this program will have the minimum 5% down payment and are looking to get into the property market sooner with help from the CMHC.

Based on that idea, we’ve compiled a look at some properties you can get in four major housing markets in Canada in the $490,000 to $505,000 price range. Take a look.

In Toronto: No houses listed but one-bedroom condos are available, typically 600-1,000 sq feet. Condos have more rooms and additional bathrooms as you get away from the city core. There is almost no supply below $300,000.

Here’s an example of what you might be able to get in the downtown core (one bedroom) in that price range.



In Vancouver: No houses listed but one-bedroom condos are available, typically 600-1,000 sq feet. More rooms and additional bathrooms as you get away from the city core.

Here’s an example of what you might be able to get (one bedroom).

In Calgary: You can find listings for two-bedroom bungalow houses downtown, along with two-bedroom condos over 900 square feet.

Here’s an example.

In Winnipeg: Limited supply at this price range. Detached houses are available however, with two-plus stories and multiple rooms. Large condos over 1,000 sq feet are available closer to a $300,00 price point.

Here’s an example.

Listing photos courtesy of

Source – –  Mike Winters on June 17, 2019

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Commentary: CMHC hike a much-needed first step in moderating price growth

Commentary: CMHC hike a much-needed first step in moderating price growth

While real estate professionals have expressed worry that the CMHC’s mortgage insurance premium hike will make purchasing more difficult for hopeful home owners, a long-time industry analyst stated that the decision is an important first step towards ensuring better affordability.

Last week, the CMHC increased the premiums on the mortgage default insurance that home buyers have to service if they put in less than 20 per cent for down payment.

In a recent column for The Globe and Mail, markets observer Rob Carrick described the housing industry’s response to the move as an attempt to score brownie points with the first-time buyer demographic.

“Expect this increase to be added to the grievance list of people who work in the real estate-industrial complex – agents and mortgage brokers, plus others who make a living from home sales. They are working hard to portray first-time buyers as martyrs to government policies designed to cool down the housing market,” Carrick wrote.

Carrick argued that the government, and not the industry’s self-interest, is better situated to effectively deal with the long-running affordability crisis.

“The wrong approach is to offer cosmetic, politically expedient help to young buyers that fails to address the reality that it’s way more of a burden to own a house than it is to buy one.”


“[These] measures are not just necessary – they may also help to make houses more affordable by containing price increases or causing them to fall,” he added. “CMHC is increasing premiums to boost funds available in case there’s an economic shock of some sort and mortgage defaults soar. High house prices increase this risk because people must stretch their finances to get into the market and then afford the full array of costs as a homeowner.”

Carrick castigated provincial governments for engaging in misguided—and ultimately, harmful—policy responses.

“Ontario is offering a limited break on land-transfer tax, while the B.C. government is offering loans to first-time buyers to help them put together a down payment on homes costing up to $750,000,” Carrick explained.

“Measures like these incrementally support more home buying, which in turns pushes prices higher. Worse, we end up helping people get into the market while ignoring the much more important question of how they’ll be able to afford their mortgage over the long term.”

Source: – by Ephraim Vecina | 23 Jan 2017
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Maple Bank Siezed by OSFI and Cut Off by CMHC

Maple Bank

Maple Bank, a niche securitization player in Canada’s mortgage market, looks like it’s going down.

Banking regulator OSFI has taken control of the bank’s Canadian operations according to the Financial Post, which quotes OSFI Superintendent Jeremy Rudin as saying, “We are guided by our mandate, which is to protect the depositors and creditors of the Canadian branch and have taken this step to safeguard their interests.”

On top of that, CMHC has terminated Maple as an approved issuer of mortgage-backed securities (MBS). CMHC made this statement:

Effective immediately, Canada Mortgage and Housing Corporation (CMHC) has suspended Maple Bank GmbH – Toronto Branch as an Approved Issuer of National Housing Act Mortgage-Backed Securities (NHA MBS). The suspension is the result of restrictions placed on the operations of Maple Bank GmbH by Germany’s Federal Financial Supervisory Authority (BaFin) that affect its ability to fulfill its obligations as an Approved Issuer.

CMHC provides a timely payment guarantee of interest and principal to NHA MBS investors. CMHC’s guarantee of NHA MBS issued by Maple Bank GmbH – Toronto Branch are not impacted by the suspension.

Here is a good summary from Handelsblatt about what triggered Maple’s woes → Link.


maple bank chart

Maple Bank is probably not coming back. National Bank has already written off its 25% stake. That’s disappointing for the mortgage market because, while Maple was a small player in the MBS market, it was still a player. And in a market where MBS spreads have widened significantly in the last year, the market needs all the liquidity it can get. (MBS spreads refer to the extra yield that mortgage investors demand on top of safe government bonds.)

According to sources, Maple bought mortgages from a handful of non-bank lenders. It also provided warehouse facilities (i.e., short-term capital to fund mortgages until they’re sold to investors). Lenders would take funded mortgages, package them up, sell them to Maple and then Maple (as a former CMHC-approved issuer) would issue MBS and/or sell those mortgage pools into the Canada Mortgage Bond (CMB) program. This provided cheaper funding for lenders than simply selling their mortgage commitments to big institutional buyers.

Based on CMHC data, Maple was ranked 21st out of 82 MBS issuers in terms of market share, with $3.49 billion of MBS outstanding out of $441 billion industry-wide.

“Losing any funder is never good,” said one lender executive who preferred not to be quoted. “All of their mortgages were originated in the broker space.” That leaves big securities firms like TD Securities, RBC Dominion Securities, National Bank Financial and Merrill Lynch as the main buyers of broker-originated mortgages. “If it’s just big players left, it’s not positive for consumers,” he added, noting that less competition raises funding costs for bank challengers.

Side story: On an unrelated positive note, we hear that Laurentian Bank is now going to be a player in the securitization space. That is very welcome news for broker lenders. More from Bloomberg.

None of this should cause investors in Canada’s MBS market to lose confidence. What sunk Maple Bank was unrelated to Canada’s housing or securitization markets. CMHC is now managing its MBS to ensure investors get paid as expected. The housing agency sent CMT this statement today:

Canada Mortgage and Housing Corporation’s (CMHC) guarantee of NHA MBS issued by Maple Bank GmbH – Toronto Branch is not impacted by the suspension, therefore there is no impact on MBS investors.  Furthermore, this suspension will have no impact on homeowners or mortgage holders.

CMHC has taken control of the NHA MBS and related mortgage cash flows and provides a timely payment guarantee of interest and principal to NHA MBS investors.

CMHC has previously had four issuer defaults in the early 1990s. No MBS payments to investors were ever missed and CMHC did not incur any losses on these previous issuer defaults.

We’re told by other sources that CMHC has never lost money by guaranteeing NHA MBS, even when issuers default. That’s thanks in part to the excess spread that’s earned between the mortgage interest (paid by borrowers) and the MBS interest (paid to investors). 

“The [MBS] trades themselves are fine; but with Maple now essentially closed for business…whoever was using them will have to find alternative funding…” said one capital markets pro we spoke with. Fortunately, all lenders who relied on Maple have backup funders, we’re told.

As for small Canadian depositors, the fallout is limited. Maple’s latest annual report notes: “The Toronto branch specializes in lending businesses, in particular the acquisition of mortgage loans for securitization, and deposit taking.” According to OSFI, however, Maple Bank is a foreign bank “authorized under the Bank Act to establish branches in Canada to carry on banking business in Canada.” Foreign banks cannot generally “accept deposits of less than $150,000” in Canada.

Maple’s last report noted that its “securitization business grew significantly” through 2014. And now it’s gone; just like that.

Source: Canadian Mortgage Trends  February 10, 2016  Robert McLister  

Maple Bank

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Condo sales with no cash down payment proposed by B.C. developer

Townline wants to sell condos in The Strand development in Port Moody, B.C., to buyers who don't have the cash for a down payment.

Buyers would get a discount, which would become a virtual down payment

A B.C. developer wants to sell condos in Metro Vancouver’s red-hot real estate market to first-time buyers without the cash for a down payment, but not everyone is sure it’s a good idea.

“It’s just a different spin on, ‘How do we provide an affordable home ownership option to buyers who otherwise can’t get into the market?'” says Townline vice-president of marketing Chris Colbeck.

The company is proposing that buyers on limited incomes be allowed to purchase a unit in its Port Moody development for eight per cent less than the appraised market value.

The appraisal would be done by an independent third party, allowing the eight per cent to be used as a virtual down payment for a mortgage.

That would mean the bank would be financing 100 per cent of the cost for the buyer, says Colbeck.

The idea has already been approved by B.C. Housing, says Colbeck, and Townline is hoping the Canada Mortgage and Housing Corporation (CMHC) will approve the program as well.

“It’s a partnership we’ve made with B.C. Housing that’s providing us the ability to do this affordability program that hasn’t been done before. They’re the ones that have structured this program,” he says.

Under review by CMHC

Townline’s proposal is still under review, said CMHC spokeswoman Karine LeBlanc.

Normally home buyers are required to put down a minimum of five per cent to qualify for Canada Mortgage and Housing Corporation insurance, and 10 per cent for homes costing more than $500,000. It is protection that banks and other lenders insist on when providing a mortgage worth more than 80 per cent of a home’s value.

In this case the CMHC may grant an exception under its flexibilities for affordable housing program, says LeBlanc, but she stops short of saying buyers could be able to buy a home without a down payment.

“Under this program, CMHC will accept a broader range of down payment sources — that means alternatives to cash from borrowers. This could include sweat equity, grants, borrowed down payments or rent-to-own payments. This is not the same thing as requiring no down payment,” says LeBlanc in a statement.

Raising the risk?

UBC Sauder School of Business associate professor Thomas Davidoff says the program may help the developer sell the units quickly while the buyers save some cash, but he still has concerns about who is carrying the risk if the property values fall.

“CMHC normally requires some sort of down payment from the buyer because they want to know if the property value falls, the buyer will still have some equity and not default on the loan,” says Davidoff.

“Otherwise CMHC has to pay the difference to the lender upon a default.… If there is a large price decline CMHC is in a first loss position.”

Davidoff notes buyers without down payments have not demonstrated the ability to save, something that left many banks in deep trouble during the U.S. housing crash of 2008.

“As the U.S. housing market did better and better in the early 2000s, we saw people believe it was impossible for prices to fall. And when you believe it is impossible for prices to fall, you get into creative debt financing products that look bad in retrospect.”

“Lenders don’t have an upside in price volatility. They only have a downside, and we are in a very volatile price environment, and I would think lenders and their insurers would want to keep that in mind.”

Fine print

Colbeck notes the proposal would not create a second mortgage, and the eight per cent discount recognized as a down payment would not need to be repaid, but there would be other restrictions on buyers.

“The program is registered on title by a restrictive covenant to ensure that it has to be for an end user, a principal resident. You must live in the home as your principal residence for a minimum of two years. And after that two years you’re free to sell your home with no restrictions at market value.”

“To qualify you have to be a qualified household income. A qualified purchaser is defined as somebody with a family income that must be $65,850 or more for a one-bedroom or a one-bedroom and den,  or $92,430 for a two-bedroom.”

Townline is eventually hoping to offer 84 condos for pre-sale this spring, if the program is approved.

“At the moment, we are simply doing an information session,” he says.

Source: CBC News Posted: Jan 12, 2016 9:33 AM PT

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Real estate dreams dashed: Priced out and resigned to renting – Skyrocketing housing prices in Toronto and Vancouver are destroying home ownership goals

Jessica Moorhouse gave up on the home ownership dream when she discovered houses in Toronto often went for tens of thousands of dollars over asking price thanks to bidding wars.

Kat Armstrong is not ready to hunt for a new rental home. She and her husband Matthew moved their family into their current Toronto apartment less than two years ago. Plus, she recently gave birth to their third child.

But her landlord has just sold their building so Armstrong has reluctantly started the search for a new place. “It is exhausting, it’s really stressful,” says the 35-year-old. “We’re at the whim of our landlords.”

“We have no security for our kids.”

Kat Armstrong home ownership afforability

Kat Armstrong with her husband Matthew and her sons Lachlan, 2 and Henry, 4. She recently gave birth to a third son and is on a reluctant search for a new rental home for her family of five. (The Little Picture)

She and her husband would love to become homeowners but that dream has been dashed. Both earn good salaries; Armstrong even runs a small business on top of her marketing job. But the family of five can’t afford to buy a house in Toronto without taking on a crippling mortgage. 

“Unless we were to win the lottery, I don’t see it happening,” she says.

Armstrong is resigned to a life of renting and so are many living in Toronto and Vancouver. Both cities have red-hot real estate markets where the average detached house is now selling near or over $1 million.

Eveline Xia

29 year-old Eveline Xia started an online conversation with her tweet about Vancouver real estate. (Twitter/@Eveline155)

Frustrations recently reached a boiling point in Vancouver thanks to a social media campaign. It was sparked by renter, 29-year-old Eveline Xia. Fed up with out-of-reach real estate prices, she tweeted#DontHave1Million. The hashtag went viral, spurring a conversation about affordability and a rally to protest the high cost of housing in the city.

Eroding affordability

Despite the outcry, there appears to be no relief in sight. A recent RBC report noted that home ownership affordability continued to deteriorate in both Vancouver and Toronto in the first three months of this year.

According to the bank’s calculations, a standard two-storey house in Vancouver sold for an average $929,000, requiring a whopping 86.9 per cent of the median household income in the city to cover the mortgage and related costs. In Toronto, the average price was $759,800, requiring 67 per cent of household income to foot the bills.

‘The average home that would fit our family is selling for $1.5 million’ – Vicky Shearer, Vancouver renter

The report also predicted the situation will only worsen in both locations due to “strong price momentum.”

It’s just more bad news for Vicky Shearer. She lives with her husband and three children in a rented Vancouver apartment.

They also find themselves at the mercy of their landlord; this is their second rental in the past five years.

“It definitely makes you feel less stable and less connected to the city,” says Shearer about renting. But the 34-year-old believes home ownership is not in the cards.

“The average home that would fit our family is selling for $1.5 million.” Shearer, who works for a non-profit, says that price is out of reach for her and her therapist husband even though both make good salaries.

She admits they could afford to “cram” the family into a “two bedroom plus den condo” but says it wouldn’t be worth the purchase price. Space would be a problem and they could only afford to buy in a neighbourhood far from their work and the children’s schools.

“The thing that stops us from buying is quality of life,” she says.

Affordable … on paper

Jessica Moorhouse thought she could finally afford to buy a house when she left Vancouver. She recently moved with her husband Josh Bowman to Toronto where real estate is at least slightly cheaper.

On paper, her goal appeared within reach — after scoping out listings, she figured she and Bowman could score a two-bedroom bungalow for around $500,000.

In January, they launched their search and Moorhouse saw their home ownership dreams erode with every house they toured.

She discovered properties in their price range often “looked like crap-holes. All these houses needed a lot of work and attention to things like, OK, you’ve got asbestos, you’ve got [bad] wiring and they’re not going fix it because they can still sell it.”

She and her husband finally found a small house they liked with a $519,000 price tag. But they lost out in a bidding war to a buyer who offered $70,000 over asking on a flood-prone home that needed major repairs. “It was kind of disappointing and disheartening,” says the 29-year-old digital marketer and personal finance blogger.

Not wanting a dilapidated house or the burden of a massive mortgage, the couple eventually threw in the towel.

“It’s frustrating,” says Moorhouse. “I did all the right things that my parents and grandparents have done and yet I can’t reach that same [home ownership] goal.”

She’s now resigned to renting in a real estate market she feels is out of control.

Out of control rental market?

A recent TD Economics report noted that due to escalating home prices in Toronto, “renting is expected to become a more popular choice.” But it also noted that that trend will lead “to a further tightening supply in the rental market.”

Mother-of-three Armstrong says she’s already worried about Toronto’s rental situation. So far, her family’s new home search is not going well. She found one affordable apartment but says it was “a dump” that would require new flooring and appliances.

“We’re finding it’s kind of impossible,” she admits.

Shearer has a secure apartment for now for her family of five. But she wonders about renting in Vancouver over the long term. “The rentals just seem to be disappearing and they’re going to be increasingly out of reach,” she predicts.

For people who can’t afford to buy, there has always been the option of renting. But a new crisis could emerge if, in Toronto or Vancouver, suddenly finding a decent rental also becomes out of reach for many.

Source: CBC News By Sophia Harris,  Posted: Aug 10, 2015 5:00 AM ET

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Real Estate: Study suggests first-timers fuelling market


According to a new survey by the Canadian Association of Accredited Mortgage Professionals (CAAMP), it seems that those responsible for keeping the housing market alive right now are actually the first-time homebuyers.

Even with the housing market prices currently at an all-time high, those purchasing a home for the first time are making up 45 per cent of the 620,000 homes sold over the past two-plus years in Canada.
The Toronto Real Estate Board’s director of market analysis, Jason Mercer, doesn’t disagree, but he believes there are a number of factors to consider as to why the housing market is still so strong.

“I wouldn’t necessarily disagree that it’s first-time homebuyers who are driving the market,” says Mercer of Toronto. “But there is also an added supply of housing now with new condominiums and project completions throughout the city.”

Mercer explains that, if we look at things like job creation and consider where unemployment rates have been trending in the last few months, we would see that Toronto’s local economy has been one of the best performing local markets.

He also credits diversity within the city as a factor in determining why we are seeing so many new homeowners.

“Toronto has one of Canada’s most diverse local economies, so there are a lot of different employment opportunities,” says Mercer. “It’s a virtuous circle in a sense that those employment opportunities attract a diversity of newcomers to Canada, and they choose to move into the Greater Toronto Area,” he adds.

The latest CAAMP consumer survey report released revealed that, even though 18 per cent of down payments are still being loaned to buyers (usually from parents), 53 per cent are using money that they themselves or their co-buyers have saved.

“Everyone questions where the money is coming from, and a lot of it is simply borrowed money, but nobody collects that data because of privacy laws,” says Sherry Cooper, chief economist of Dominion Lending Centres. She believes the money is coming from parents. “It’s baby boomer parents helping out their kids.”

However, Cooper doesn’t agree that it’s first-time homebuyers exclusively who are driving local housing markets, especially with regard to the biggest increases in Toronto and Vancouver.

“Employment might be growing in Toronto, but it is also dampening in places like Alberta, because of the oil patch, so places like Calgary and Edmonton have been negatively affected.” She stresses that the survey was based on all of Canada and to keep in mind that those markets are much cheaper than Toronto and Vancouver.

Source: Post City Toronto BY TINA ROBINSON Published: Tuesday, Jul. 28, 2015, 09:05 AM

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CMHC to Allow 100% of Suite Income

The market for houses with basement apartments is about to get a little hotter. CMHC has announced that it will allow 100% of the rental income from legal secondary suites to be used when qualifying for a mortgage. Currently it allows 50%.

The nation’s largest default insurer says the move is meant to “Facilitate affordable housing choices for Canadians.”

“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,” it adds. Secondary/basement suites also give lower-income Canadians the chance to live in single-family residential neighbourhoods.

The new rule takes effect September 28, 2015.

“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, of DLC’s Peter Kinch Mortgage Team. “…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.”

Broker Marg Green, of Concierge Mortgage Group, agrees that “There will be a big demand for it”, but rightly notes that more clarity is needed on what CMHC considers a legal suite. “What is legal? Is it fire retrofitted? Is it registered with the city? If the suite isn’t legal, lenders generally won’t use the rental income (for qualification purposes).”

Here’s what we’ve gathered thus far, with respect to what’s required to use 100% of suite income with CMHC:

  • 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.

On 3-4 unit owner-occupied properties and 1-4 unit non-owner occupied rentals, CMHC will be allowing a net rents calculation (i.e., gross rents less operating expenses).

Note that individual lender guidelines may very well be tighter than what you see above.

Genworth and Canada Guaranty have had a 100% add-back policy for a while (for basement suites), but mainly in Victoria and Vancouver. CMHC’s new policy extends nationwide. Both private insurers say they’re reviewing CMHC’s changes and haven’t decided if they’ll match this guideline. We’ll bet that one or both of them will.

“In the big picture, I do not see that this will have a significant impact on the overall housing market,” says Kinch. “But in certain suburban areas, this shift in CMHC policy will help speed up a trend that is already taking place, and that is the widening price-gap between single-family and multi-family (condo, townhome) homes.”

Another broker, who didn’t want to be named, said the move could encourage more people to lie about owner-occupying a property (i.e., say they’re living in one unit but renting out both units). That minor unavoidable side effect aside, CMHC deserves applause for trying to boost the stock of affordable rentals and allowing young homebuyers an alternative to condo living.

Source:  July 27, 2015  Robert McLister  

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We don’t charge you mortgage insurance: CMHC – You could still pay a premium even with a 20% down-payment

CMHC and Genworth don't charge mortgage insurance fees. You're bank does (Getty Images / Oxford)

Source: Money Sense, by by May 25th, 2015

We recently got an email from a reader who was quite perturbed. He had saved his money was diligent about his budgeting, and was set to purchase a modestly priced home near Ottawa. But when he went to use the Canada Mortgage and Housing Corporation’s mortgage calculator to figure out his final costs, he was surprised to see an additional $2,500 tacked on to his mortgage. Here’s why:

Q: Every resource I’ve consulted says that a down-payment of 20% or more on a home waives any mortgage insurance premium that I would be required to pay if I were putting down less of a down-payment. However, when I use the CMHC mortgage affordability calculator, and enter a purchase price of $250,000 with a down-payment of $50,000 (20% of the home’s value), it gives me a mortgage insurance premium of $2,500 not $0. My question is why are home buyers told that a 20% or more down-payment is sufficient to avoid mortgage insurance fees, if that’s not the case? —Peeved with Premiums

Dear, Peeved with Premiums: You have a right to be concerned. Home buying is a stressful process and every dollar counts, so it would certainly come as a surprise to learn that despite saving up a 20% down-payment you’re still expected to pay a mortgage insurance premium.

But there’s good news: You won’t have to pay.

Any property purchased in Canada that has less than a 20% down-payment is required, by law, to have mortgage insurance. This insurance is to protect the lender, not you, and the fees drop as your down payment gets larger. In Canada there are currently two entities that provide lenders this insurance:Genworth and Canada Mortgage and Housing Corporation (CMHC).

But don’t be confused. The laws to purchase this insurance don’t actually impact you—they impact your lender. In other words, federal laws demand that lenders purchase this insurance from Genworth and CMHC. Federal laws don’t stipulate whether or not lenders have to pass on this cost to Canadian home buyers. That decision is up to the lender.

But before you get out the placards and set up a protest, let’s put this in perspective. A conventional mortgage is where you put 20% of your own money (or more) as collateral towards owning a home. But it’s a large purchase and 20% can be tough to save up (particularly in a hot real estate market where prices keep going up). That’s why the federal government came to an agreement with CMHC and Genworth to offer mortgage default loan insurance (the official name) to lenders who were willing to accept a less than 20% down payment when it came to a home purchase. When a borrower qualifies to purchase a home using a non-conventional or high loan-to-value mortgage, the federal law requires mortgage loan insurance and this cost is passed on to the borrower.

Simply put: It’s a fee passed on to you for the benefit of owning a home with less than 20% down.


Still, it’s pretty much an industry standard for lenders to pass on the cost of mortgage insurance to their borrowers who put down less than a 20% down-payment.

What’s not typical is to pass on this cost if a home buyer puts down 20% or more as a down-payment on a property. But that doesn’t mean it doesn’t happen. Fact is even when you purchase a home with more than 20%, many lenders will still opt to purchase the insurance. Why? It helps defray the downside risk of mortgaging a more expensive property. Think: Toronto and Vancouver where average prices for detached urban homes reach or surpass $1 million.

But in only a few cases, will a lender decide to pass on the cost of this mortgage insurance when a borrower puts down a 20% or more as a down-payment. “It’s not typical,” says one mortgage broker, “but it can happen.”

It will only really happen if the borrower moves from the A-list (of high quality borrowers) to the B-list (riskier borrowers) and red flags for getting on the B-list include: bad credit rating, you’re self-employed or have a spotty employment history, you carry a large debt load that’s close to the threshold (to understand mortgage ratios, read my blog on the basics of debt ratios and qualifying for mortgages.)


Of course, none of this applies to Jon our reader. He’s been steadily employed for decades, he doesn’t carry an exceptional debt loan and the size of the mortgage on the property is not only manageable, but conservative given the current real estate market.

For that reason, I reached out to the CMHC to ask, specifically, why their calculator would include this fee. Karine LeBlanc, media relations officer with CMHC, responded:

“It is important to note that CMHC’s mortgage affordability calculator is for general illustrative purposes only. The amounts it projects are based upon assumptions and estimates made according to generally accepted principles for mortgages in Canada. CMHC cannot guarantee the projections. Actual payment amount must be obtained from a person’s lender.”

In other words: Don’t take any mortgage calculator at face value.  Talk to your lender. And if you find that your bank feels it necessary to pass on the fee, I would suggest shopping around. The mortgage business is hyper-competitive these days and finding a lender with a great rate that doesn’t pass on extraneous fees should be easy as 1-2-3.

Read more from Romana King at Home Owner on Facebook »

(Just a heads up: Mortgage insurance premium rates recently went up both at CMHC and Genworth and investors, those with vacation homes or second mortgages will want to pay attention to the different rates that Genworth applies to these types of properties.) Here’s the standard rate charts for both Genworth and CMHC.

CMHC mortgage insurance premiums

Genworth's mortgage insurance rates

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Buying a house with only 5% down

Buying a house with only 5% down (mstay/Getty Images)

Real estate is a popular investment because for a relatively small amount of money, you can own an asset worth significantly more. It’s the power of leverage and while there can be some significant drawbacks used wisely, leverage can help you build your net worth.

For first-time home buyers, this leverage opportunity translates into a chance to put only 5% down to own your home. For instance, you could purchase a condo or home for $450,000 with only $22,500 (plus transactional/closing costs).

But to use the 5% down payment option, the following rules apply:

* The home will be your principal residence—in other words, you will actually live in the home. So if you plan on buying a condo, only to rent it out, you won’t be eligible for the Canada Mortgage and Housing Corporation’s 5% down payment option.

* The actual 5% sum must be from your own funds or from a gift from a family member. You cannot use a loan or line of credit.

* You can prove to your lender that you can cover the transactional closing costs on the real estate deal. A rule of thumb is to keep 1% to 1.5% of the purchase price aside for closing costs. So, a $450,000 home will require you to put aside at least $4,500 to pay legal fees, land transfer costs, etc.

* You must have good credit and a minimum of one year with your current employer.

* The cost to pay the mortgage, your heat and hydro, the condo fees (if applicable) and property taxes cannot exceed more than 32% of your gross taxable income—this is your Gross Debt Service ratio, or the GDS. Plus, all your consumer debt, loans and housing-related payments cannot exceed 40% of your gross taxable income—this is your Total Debt Service ratio or the TDS. To learn how banks use these to qualify you for a mortgage, read my prior post.

Source: MoneySense  July 22nd, 2015

Borrowing is tougher for self-employed

Homebuyers looking for a mortgage are finding conditions are getting tougher if they are self-employed, at a time when there is an increasing number of self-employed Canadians. Solid credit scores are multiple years in business are still not making it easy for business owners to buy their own home. Chad Oyhenart, a Vancouver-based mortgage broker at Dominion Lending Centres told The Financial Post that conditions are tougher as the result of rule changes over the past 7 years: “They just want to make sure that they’re not putting Canadians into situations that they can’t get out of, so that we don’t end up being the U.S.” Jeff Mark of Spin Mortgage also sounded a supportive note for tighter regulations commenting that they were too loose in the past. He says that the self-employed may have to take larger incomes from their businesses, meaning more tax to pay, in order to qualify for mortgages.
Source: Steve Randall | 24 Jul 2015