CMHC opens way for more Canadians to become landlords

Canadians can become landlords more easily with a new CMHC mortgage-insurance product that allows people to buy rental properties with no down payment.

For a premium based on the loan amount, Canada Mortgage and Housing Corp. now insures mortgages so investors can buy up to four units of rental housing with little money down.

The Crown corporation now allows 100-per-cent financing on one or two units and 90-per-cent financing for a third and fourth rental units.

Until last month, CMHC required a down payment of 15 per cent on investment properties.

The new product, introduced last month, also changed the way financial institutions calculate the ratios used to qualify borrowers for mortgages, which makes it easier to buy rental property.

It's a complicated formula, but rather than adding 80 per cent of the rental amount to the borrower's income, then working out the debt ratio, a 20-per-cent shortfall is added to the expense side of the calculation. The change reduces the income needed to qualify for the mortgage.

"The small rental enhancements help qualified Canadians take advantage of opportunities to invest in rental properties," said Pierre Serré, CMHC's vice-president of insurance products and business development.

"By purchasing these properties, these borrowers will help increase the rental housing available . . . and maintain the stock of affordable housing."

The insurance premium is 7.25 per cent of the mortgage amount for 100-per-cent financing.

Paula Siemens, a mortgage broker with Invis Canada in Vancouver, said the new product will be attractive to investors who are interested in becoming landlords and have a reasonable cash flow to handle unexpected vacancies and expenses.

"For people who are self-employed or who don't have a pension plan, this could give them an investment option that will generate cash flow in retirement," Siemens said. "The rent will pay down the mortgage and when you're ready to retire, you will have the revenue from your rental properties as income."

(prepared by Wendy McLellan/Vancouver Province)