As of Sept 25, 2015 more income can be used from legal rental suites. This is great news for home owners looking to generate additional income during this rather tough economy. Secondary suites are also a wonderful option for aging parents and grown children. Perhaps an owner-occupied legal secondary suite is something to consider for the new year! There are some stipulations that must be met; these are outlined below.
100% of rental income can be used on insured mortgages that meet the following criteria:
- 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 can be excluded from the borrower’s debt ratios
- 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).
Please let me know if you have any comments or questions! I look forward to hearing from you.
Information courtesy of Scott Bourke, Mortgage Advisor / Partner at Dominion Lending Centers. Scott can be reached at 403-598-1055.