Self-Employed Income Qualification Changes

CMHC (Canada Mortgage & Housing Corporation) has stated that as of April 9, 2010, self-employed individuals who are applying for a stated-income mortgage will now have to put down at least 10%, up from 5%.

CMHC has also tightened some of the rules around who can qualify for their stated income self-employed mortgage. Borrowers that have been self-employed for more than 3 years will now have to qualify based on income declared to CRA and will have to provide adequate income confirmation which normally consists of a minimum 2 full years of T1 Generals, business statement activities, Notice of Assessments showing no outstanding income tax.

Proof of being in business in the form of a BN and or GST number may also be required. The same applies for those earning through commission.

CMHC's stated income self-employed products is now aimed more at those who have been self-employed less than 3 years and have difficulty proving income.

What's Changed in Terms of Qualifying for a Mortgage?

As of April 9, 2010, borrowers applying for a variable rate, adjustable rate mortgage or a fixed mortgage with a term less than 5 years must qualify based on the Bank of Canada's five year fixed posted mortgage rate. Note that 5 year term fixed mortgages can be qualified at the broker discounted rate.

Some lenders who offer a variable rate will have the payment based on their 3 year rate, which is higher but there is a positive side to this. The difference between the variable rate and the 3 year fixed is applied to the mortgage principle and accelerates the mortgage which can save you thousands of dollars and lower the time it takes to pay off the mortgage. Couple this with accelerated weekly or bi-weekly payments and toss in some annual pre-payments ,you can literally save thousands and be mortgage free years sooner.

For more information, please contact me.

Recent Changes in Rental Properties

A minimum down payment of 20 per cent will be needed for government backed mortgage (CMHC) insurance on non-owner occupied properties such as rental properties.

There are also changes in how much of rental income can be used when qualifying for financing. Both CMHC and Genworth have indicated that now 50 percent of the rental income will be added to the borrower's income, down from 80 per cent rental offset from payments that will be used when calculating the borrower's TDS.

Invis together with Mortgage Intelligence forms the largest firm in the mortgage brokerage industry in Canada, and we have the industry's best support team working for you.

Feel free to contact me any time but please not on a Sunday as this is quality family time for you and for me.