There were some exciting new changes made recently, that come into effect September 28, 2015, for those who are thinking of purchasing homes with a rental suite.
The mortgage default insurer CMHC has changed its regulations on allowances for income from a secondary suite. Previously only accepting 50% of the income generated from a rental suite, CMHC will now allow 100% of rental suite income as part of a borrower’s income in calculating how much a borrower would qualify for a mortgage.
The ability to use 100% of the income generated from a rental suite will definitely make buying a home with a revenue component more attractive to some buyers. Really, I am surprised more buyers don’t consider income-producing properties as an option when considering a home. Many people don’t want the extra hassle or infringement on their privacy, but for a younger person or couple, or those whose chicks have flown the coop, it is a smart investment. For example, on a $250,000 home, if you had a basement suite renting for even $500 per month, it could pay for more than a third of your mortgage payment.
From what I read, the stipulations would be that the property must be owner-occupied, can only have 2 units (so a house with a suite or a complete duplex unit), the suite must be conforming or at least legally non-conforming and the suite needs to be self-contained with its own entrance. It looks like they will take a 2-year rental history to determine the amount of income to calculate, or you would have to have a market rent appraisal done and use that number.
So the bottom line is, if you have been thinking about purchasing a property with a rental suite, you may want to wait until after September 28 if you want to qualify for a higher mortgage. At the very least, double check with your mortgage specialist. That way you may be able to upgrade in house AND have someone else helping you to pay your mortgage. Seems like a win-win to me.