New CMHC change means basement suites can help qualify homebuyers for higher mortgages

“Good news” allows rent to be counted as income 
Mortgage broker Peter Kinch: should help first-time suburban house buyers | Photo: Dominion Lending Centres

A change by Canada Mortgage and Housing Corporation (CMHC) that will allow buyers to count 100% of rental income from a secondary suite towards their income is “good news” for Vancouver area first-time buyers, analysts say.

The ruling will also help landlords who hold up to four rental suites, even if they don’t live in the building.

CMHC is Canada’s largest mortgage insurer and provides coverage for those with less than a 20% down payment.

Effective September 28, the agency will consider up to 100% of the gross rental income from a two-unit home as personal income for mortgage qualifications. Previously up to 50% of the rental income could be counted as income, at the discretion of mortgage lenders.

For up to four-unit rental properties, the net income can form part of the mortgage borrower’s gross annual income, whether the property is owner-occupied or not.

“This is definitely good news for anyone who is looking to buy a home and subsidize the cost with a mortgage helper,” said mortgage broker Peter Kinch with Dominion Lending Centres, based in Port Moody. “This can certainly make the difference for many homeowners and may move a larger number from condo purchases to a single-family house with a mortgage helper.”

Kinch sees most of the take up coming from first-time buyers trying to purchase a detached house in suburban markets.

Realtor Colette Gerber of Sutton West Coast Realty, the director of the West Side division for the Real Estate Board of Greater Vancouver, said the change may also encourage the addition of more rental suites in the city.

According to CMHC, Vancouver has 26,600 secondary rental units, which can include basement suites, in-law suites or detached laneway houses built on existing single-family lots. These make up about 20% of the rental stock in Vancouver, where the apartment vacancy rate is 1.4%.

“This move is very opportune considering how tight Vancouver’s rental market has become. With the increasing challenge of finding affordable housing in Vancouver this will have a positive impact on the rental market,” Gerber said.

The CMHC change comes with some caveats. The rental income must have been sustained over at least two years; and homebuyers should have a minimum credit score of 680 to have all of the gross rental income counted as personal income.

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