Rental offset is the percentage of rental income a borrower receives that the lender is willing to use to qualify him/her for a mortgage. Specifically, the use of 80% rental offset will be eliminated on April 19, 2010. It will be replaced with a 50% add-back calculation. This will have a significant impact on how much mortgage one can qualify for.
CMHC will allow a maximum of 35% of your gross monthly income to be allocated towards your housing cost, and up to a maximum of 44% of your gross monthly income towards all your credit obligations. Under the proposed new rule, a house with a $1000/mo basement suite will be treated as follows:
- 50% of the $1,000 of rental income is $500/mo.
- $500 dollars per month will be added to your monthly qualifying income.
- CMHC will allow a maximum of 35% of your gross monthly income for housing.
- 35% of $500 per month is what the actual buying power of this rent becomes.
- 35% * $500/month = $175/mo.
- $175/month translates to approximately $40,000 of extra buying power based on a 3.79% 5 year term and 35 year amortization.
Under the existing rules (until April 19th) CMHC applies an 80% offset for rental suites. Under current guidelines a $1000/month suite will yield 80% or $800/month of extra buying power. This translates to approximately $185,000 of extra buying power based on a 3.79% 5 year term and 35 year amortization.
This is a significant change to how rental income is treated when clients have less than 20% down!
You may want to contact me to discuss Email me
Mark Fidgett | 604-273-2002
“Your Personal Mortgage Consultant….For Life!”
PS – Please Don’t Keep Me a Secret
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T 604.273.2002 | F 604.522.2072
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An independent Mortgage Specialist associated with the Verico Mortgage Network.
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Hi Mark,
I am a realtor working in the Greater Vancouver area. I’ve been receiving your emails regularly and they are very interesting. I want to confirm with you if it’s o.k. for me to sent some of your emails to my clients. If any of my clients have any further questions I’ll let you know or have them contact you directly. Please confirm, thanks!
Virginia Kung
Macdonald Realty Ltd.
PS – Please Don’t Keep Me a Secret
YOUR REFERRAL is my greatest compliment!
Email: v.kung@telus.net
Contact: 604-809-1881
Most definitely Virginia, would love to help : )