19 march 2010
1) All changes will be implemented starting April 19, 2010 (with exception to change # 7 & 8 – they will be implemented on April 9). The changes will have a strong impact on the current Self Employed Simplified program.
2) Qualifying rate. Speaking about Insured loans with fixed term of less than 5 years and for all Variable rate mortgages, the qualifying interest rate will be the greater of: the benchmark rate and the contract interest rate (the benchmark Bank of Canada’s 5 year interest rate is the average of the 5 major banks posted 5 year rate). This will be the new qualifying rate for shorter term mortgages and variable rate mortgages. In other words today’s qualifying rate will rise from 3.40% to 5.39% for borrowers with the down payment less than 20%.
3) Refinance loan – maximum value will be 90% (currently- 95%)
4) Maximum loan to value for rental (non owner occupied) will be 80% LTV 1 to 4 units (in other words -min downpayment 20%).
5) Rental income qualification. 50% of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purpose of calculating the borrower’s Total Debt Service Ratio.
6) Maximum numbers of Units under CMHC Second Home. Second home product only available for 1 unit owner occupied properties.
7) Changes to CMHC Self Employed Product will be effective April 9. For purchase and portability the maximum LTV will be 90%. For refinance the maximum LTV is 85%. Also qualification rules have changed for this product. If a client has been self employed in the same business for more than 3 years, they are NOT eligible under the CMHC Self Employed Product without Traditional third party validation of income (qualified deal). CMHC will continue to require that the borrower have a minimum of 2 years experience in the same field. This can include time spent working as a non self employed worker in the same field. Lenders are expected to obtain a copy of the business or GST license or Articles of Incorporation. Therefore if a client is self employed over 3 years, then you cannot do a self employed product. It must be qualified. If a client is self employed up to 3 years, you can do a self employed product.
8) Commissioned income will no longer be eligible for the CMHC Self Employed Product without traditional third party validation of income.
We are still offering (until April changes are implemented):
– 80% rental offset on all rental properties; subject and other. Suites must be legal in order to use the income. We require an overall DCR of 1.2 when a client has 3 or more rentals.
– No NOA’s required on the self employed stated income program.
We have many lenders who are ready to fill the gap after April’s changes will take effect. If you are strong and active Self-Employed individual or Business Owner and have difficulties to confirm your income in traditional way call us or ask questions online.