Government of Canada Mortgage Rule Changes The following is the current understanding/interpretation of the technical rule changes now in place for insured mortgage lending and is an informal, courtesy communication to our partners. For verification and complete details, please refer to the Department of Finance (www.fin.gc.ca/n10/10-11-eng.asp) Qualifying Interest Rate. For all loans with fixed rates on less than 5 year terms, and for all variable rate mortgages, regardless of term, the qualifying rate must be the “benchmark” Bank of Canada 5 year posted rate. For loans with a fixed rate term of 5 yrs, the qualifying rate is the contract rate - which is actual rate that the client receives. The “benchmark rate” is defined as the most recent Bank of Canada “Chartered Bank - Conventional Mortgage 5-year rate” in the series V121764. For “benchmark rate,” updated each Monday, visit www.bankofcanada.ca/en/rates/interestlook.html. TDS Formula for Rental Income No longer able to use an 80% rental offset in the TDS formula. If the subject property generates rental income, 50% of the gross rental income can be added to the borrower's gross annual income. Rental income from all other rental properties can be used, but must be verified via NOA's and T1 Generals. You can only gross up the net rental income by 15%. Maximum Loan-to-Values Owner-Occupied Refinance: 90% Revenue Purchase/Refinance: 80% Stated Income Owner-Occupied Purchase: 90% Stated Income Owner-Occupied Refinance: 85% Second-Home Purchases Now only available for single-unit properties (was 4-plex before) occupied at some point in the year by the borrower-owner or a relative (on a rent-free basis). Owner-occupancy must be verified. Business-for-Self Income (stated or confirmed) must represent the borrower’s total personal income on Line 150 of the NOA, not gross business income. A “Gross Up,” or increasing this number by 15%, is still allowed. Business-for-Self Stated Income Borrowers who have been self-employed for more than 3 years will NO LONGER qualify under the CMHC Self- Employed Product and must go on Line 150 of their NOAs. Genworth will continue to allow 3+ years self-employment. Commissioned borrowers will NO longer qualify; substantiating documentation required for commissioned income is the 2 year average of Line 150 of the NOA Borrowers will continue to require two years of experience in the same field. Required to verify maximum length of self-employment via Business or GST Licence, or Articles of Incorporation (or past three years of borrower’s NOA’s or T-4’s showing third-party income). |