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:

  1. 50% of the $1,000 of rental income is $500/mo.
  2. $500 dollars per month will be added to your monthly qualifying income.
  3. CMHC will allow a maximum of 35% of your gross monthly income for housing.
  4. 35% of $500 per month is what the actual buying power of this rent becomes.
  5. 35% * $500/month = $175/mo.
  6. $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!”

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An independent Mortgage Specialist associated with the Verico Mortgage Network.