Investment Property Mortgage Rule Changes in Canada

Real Estate Agent with Discovery Real Estate Ltd. - "Homes By Jones"


Re-Blogging Don Lawby President of Century 21 , Canada


Investment Property Mortgage Rule Changes

As many as 15% of all new mortgages granted in Canada are for properties the owner doesn't live in. And now, starting this spring, the landlord/investor has to put down a minimum down payment of 20%in order to obtain Canada Mortgage and Housing Corporation (CMHC)- insured properties, part ofrule changes announced in February.

However, it's worth noting that it is not all bad news when it comes to the federal government's recent changes to rental property financing. For example,

  • The changes won't apply to borrowers who buy principal residences that also include some rental units
  • The increase in down payment - up from 5% - will significantly reduce the risk of "reckless speculation that can drive prices to unsustainable levels which does not serve Canadian home buyers" (to quote Finance Minister Jim Flaherty)
  • The new rule will be difficult to administer - given that lenders cannot be 100% sure of when mortgage-seekers plan to live in a home they wish to purchase
  • A possible drop in the inventory of rental units in Canada could push more people to buy home instead of renting

    And this change only applies to CMHC insured mortgages for investment properties. As one prominent 
    Canadian finance blogger wrote about the new rule change, "If I were to buy a rental property today, I would put down at least 20% to avoid the CMHC fees regardless of the new rules."

Nevertheless, the largely unexpected mortgage change has the potential to put a damper on income property financing business for lenders and brokers, and it means that people seeking investment properties need to be more creative in seeking financing - such as using a private lender, or attracting joint venture capital and finding a partner to go in on the home purchase with them.

What do you think? Whether or not you are considering the purchase of a property you will not be residing in, we'd like to hear your point of view. Leave your comments 



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Samantha Davault
Alexander Chandler Realty - Fort Worth, TX
Fort Worth, TX

Hi Bill,

Welcome to our world.  We have been dealing with these guidelines for a while now.  As with all the new rules that have come into effect lately.  We all learn to work with it.

Mar 28, 2010 05:23 PM #1
Clark Hitchcock
Re/Max Nyda Realty Inc - Chilliwack, BC
Realtor - Fraser Valley

It definitely will change the the landscape for investors here in Canada.

Mar 28, 2010 05:47 PM #2
Robert L. Brown - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

That's nothing new here. Thy will just have a little more invested in the property they're going after.

Mar 29, 2010 12:58 PM #3

Call me an old conservative, but I still live by the old 25% down rule.  That keeps my mortgages conventional, non-CMHC, and makes my investments "safe" enough that a temporary few % dip in the market doesn't worry either me or my bank.  But then, I'm a buy-and-hold guy.

5% down on a rental property is reckless.  People who do this should have their heads examined.  This is the kind of thing that gave us the meltdown in the U.S.

So personally I find this rule perfectly reasonable. 


 "The changes won't apply to borrowers who buy principal residences that also include some rental units"

There is a new rule for these people - that only half of expected rental income can be used to calculate total personal income for the purpose of qualifying for the mortgage.  Something that's not been clear in the press on this has been - does it also apply to purchases of rental properties that the owner does not live in?  That is, if I buy a triplex that I will not live in, is there going to be a change in how the income from that property is used to qualify for the mortgage?

Apr 06, 2010 12:26 AM #4
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Bill Jones

Realtor (403-701-1739) Airdrie & Calgary Area Homes and Condos
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