Times are changing, and the world of mortgages keeps pace.  You may very well know from reading this column, that Consumers attempting to buy with less than 10% down had to cope with a Canada Mortgage & Housing Corp (CMHC) imposed maximum sale price on the dwelling (residence) of $175,000 in urban Ottawa and $125,000 in rural Ottawa.  As of this month, the ceiling has been raised to $250,000 and includes various Townships that had eluded the $175K maximum.  These Townships include West-Carleton, Goulbourn, Osgoode, Rideau, and Russell.  Since the news is so recent, you may run into some opposition from your mortgage lender who may not be aware of the change. You cannot reach CMHC yourself, the loan request must come from your lender.  The rules for personal qualification have not changed, your mortgage is still subject to you proving you can afford the venture.  The proof is still based on the house mortgage costs, inclusive of taxes and heat, not surpassing 32% of your gross income (net income for self-employed individuals), and all your instalment debt payments, inclusive of the house, not surpassing 40% of your gross pre-tax income.

Other changes at CMHC involve allowance of small rental properties within their insurance mandate.  CMHC's purpose (mandate) is to protect lending institutions against losses suffered in a default situation.  Lenders do their best to underwrite loans (mortgages), but nobody knows what the future may bring.  Any amount of normal financing that exceeds 75% must be insured against default, while small rental property lenders would feel more comfortable having CMHC coverage on loans above 65% financing.   Small rentals are defined as rental properties of 1-4 units where the owner does not reside on site, or 5 and 6 units whether the owner is present or not.  The fees for CMHC have been recently upgraded to allow for this type of product.  The underwriting fee (study fee) is basically $150 per unit, with a minimum of $600.   Over and above this latter fee is the insurance premium which can be added to the loan.  The higher the loan-to-value, the higher the premium.  The breakdown is as follows:

LOAN TO VALUE RATIO
Up to and including 65% 1.75% of the loan amount
Up to and including 70% 2.00% of the loan amount
Up to and including 75% 2.25% of the loan amount
Up to and including 80% 3.50% of the loan amount
Up to and including 85% 4.50% of the loan amount

Investors should also be aware that CMHC will insist that the personal net worth of the individual buying or guaranteeing the loan is at least 25% of the required loan or $100,000, whichever is the lesser.  Included in net worth calculations, RRSP's count at 50% of value, vehicles at 90% of value and raw land at 50% of value.  In other words, if you want to buy investment real estate, but your net worth is not at least $100,000, don't apply for more than conventional financing (up to 75% at various lending institutions).  There are other guidelines which must be met such at minimum debt service coverage, which your lender must take into consideration before submitting the file to CMHC.  Again, you must remember that you cannot approach CMHC on your own, the request must be through a CMHC approved lending institution.  The minimum required down payment must be 15%, but contrary to homeowner loans (mortgages), this amount may be borrowed, as long as debt service ratios are met.