***IMPORTANT UPDATE*** CMHC Softens Approach to 5 Year Fixed Qualification Rate
Info received from Mike Hatch of Ottawa’s Home team at www.ottawashometeam.com
- The qualifying interest rate used to assess borrower eligibility will change only for loans with a loan to value ratio (LTV) greater than 80% as follows:
CMHC defines the benchmark rate as the Chartered Bank — Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01 AM (Eastern Time) each Monday.
- The maximum amount Canadians can withdraw in refinancing their mortgages will change to 90 per cent from 95 per cent of the value of their homes.
- A 20 per cent down payment will be required for 1-4 unit rental (non-owner occupied) properties. In support of the government position, CMHC will also be implementing changes to the calculation of a borrower’s Total Debt Service Ratio where rental income is generated from the subject property. Effective April 19, 2010, fifty percent of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purposes of calculating the borrower’s Total Debt Service Ratio. Additionally, CMHC Second Home product will only be available for a one unit owner occupied property. Furthermore, CMHC subsequently announced that effective April 9, 2010 self-employed borrowers with more than 3 years in the same business and commissioned-income borrowers will be required to provide third party validation of income to qualify for CMHC’s Self-Employed Product. For the majority of self-employed borrowers, income validation is readily available through financial statements, contracts, T4s and other third party income validations. The changes will ensure that self-employed borrowers with third party income validation will benefit from a lower premium. A small portion of borrowers, such as those recently self-employed, may continue to apply for the CMHC Self-Employed Product Without Traditional Third Party Validation of Income, subject to a maximum loan-to-value of 90% for purchase transactions and 85% for refinance transactions.
To obtain more info contact Mike Hatch or his team directly at firstname.lastname@example.org