The good news is CMHC (Canadian Mortgage and Housing Corporation) has been making changes to help self-employed individuals to attain a mortgage.
Mortgage default insurance, which is commonly referred to as CMHC insurance, is mandatory in Canada for down payments between 5% (the minimum in Canada) and 19.99%. Mortgage default insurance protects lenders in the event a borrower ever stopped making payments and defaulted on their mortgage loan.
Although mortgage default insurance costs homebuyers 2.8% - 4%1 of their mortgage amount, it does allow Canadians who might not otherwise be able to purchase homes access to the real estate market. Without it, mortgage rates would be higher as the risk of default would increase. Lenders can offer lower mortgage rates when mortgages are protected by mortgage default insurance because the risk of default is passed along to the mortgage insurer.
There are some requirements you have to meet to qualify for mortgage default insurance:
- The maximum amortization for insured mortgages is 25 years.
- If the purchase price is between $500,000 - $999,999 a higher down payment is required. The minimum down payment is 5% of the first $500,000, and 10% of the remaining amount.
- Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes.
Those who have documentation to prove their income can now have access to all 1-4 unit properties under the CMHC Mortgage Loan Insurance programs. This means that self-employed people can be assessed as borrowers who are not self-employed.
With this being said, there are some guidelines that must still be followed and vary from individual lenders. Some examples are:
- Be in the same line or work or business operation for a minimum of 24 months
- Be a Canadian citizen, a permanent Canadian resident, or a non-permanent resident who is legally allowed to work in Canada.
- Non-permanent residents must purchase a 1 unit owner-occupied property with max LTV (Loan To Value Ratio) of 90%.
- One can only have a max of one CMHC-insured property at a time.
In a difficult lending environment, it is great to see that attempts are being made to get people back into the market with fairer access to home purchases.
Kandice Henry is a Real Estate agent with CityScape Real Estate Brokerage. She has been in the Real Estate field for over 10 years.
Her hands-on knowledge began when she purchased, flipped, and leased her own properties. Two years ago she began her career as an agent and has had much success helping clients purchase and lease in both the residential and commercial sectors. She is a hard working agent who truly cares about finding the perfect fit for her clients. Kandice's resourcefulness lends to her full, experienced team behind her that is ready to help you close your next lease or purchase.