CMHC Discontinuing Second Home Program and Self-Employed Without Income Validation

CMHC has announced two changes that would  take effect on May 30, 2014

1. Cancel of the CMHC Second Home Program

Starting June 1st, 2014, investors/buyers would need a minimum of 20% down payment for their second home, they will not be able to take advantage of the 5%+ down payment that CMHC used to provide to purchase the second home for kids, parents, or yourself.  Officially after May 30, 2014 a 20% down payment will be required to purchase the cottage or  lake side condo second home and CMHC will limit the availability of homeowner mortgage loan insurance to only one property (1-4 units) per borrower/co-borrower at any given time.

What the limit means is if you currently have a property that is CMHC insured mortgage and wish to co-sign for a borrower that is planning on buying a new property and s/he requires mortgage insurance as well, you would not be allowed to co-sign as you already have a CMHC insured mortgage. Although this does not stop gifted downpayment from a potential co-signer (e.g parents), which would allow the mortgager to qualify for the mortgage on their own.

2. Cancel of Self-Employed Without 3rd Party Income Validation

Self-employed Individuals will still be able to access and quality for CMHC mortgage insurance loans when the loan is below 20% down payment, but they will need to validate and prove their past 2 year income, provided by copies of tax notice of assessment, audited or unaudited financial statements, which would still need to be approved by CMHC.

There are definitely alternatives for self-employed individuals, if they cannot provide 2 year income paper work. I would strongly advice to speak to a professional mortgage broker who will be able to help with finding subprime lenders. Contact me for some references.

If you wish to avoid CMHC product changes, you will need to have to accept offer of purchase on a specific property and your application must be submitted to CMHC for approval prior to May 30th 2014. Contact me and I will be able to help you find you the right property.

Author: Nilay Ertemur

Reference: http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2014/2014-04-25-1600.cfm