It’s going to be easier for self-employed Canadians to get a mortgage, thanks to new guidelines released today (July 19, 2018) by the Canadian Mortgage and Housing Corporation (CMHC).
If you’re self-employed, you’re no stranger to having a harder time in general. Not only do self-employed people work more (far from just an American phenomenon) but they also have to put more effort into their taxes and mortgage applications.
It can be hard for a self-employed Canadian to get a mortgage – and with the proportion of self-employed Canadians reaching 15% (according to CMHC) then that means 15% of Canadians are having a harder time than necessary getting into a new home.
CMHC aims to remedy that situation by October 1, 2018, when new guidelines take effect.
These guidelines will be aimed at lenders, rather than the borrowers. They’ll provide examples of factors that they can use to determine if a self-employed individual is a good candidate for a mortgage. This is similar to our strategy – that’s how we approve so many self-employed people – but will now extend to the big banks, who have a harder time approving because of their strict lending rules. Soon there will be an established rule set that can be referenced to approve mortgages.
These measures only apply to getting CMHC insurance, however. That means that the home must be purchased with a down payment of less than 20% and also be under a million dollars. CMHC doesn’t insure mortgages greater than 20% or $1 million. That means that those who can afford a larger down payment in order to reduce their monthly payments (which you can calculate here) may still run into difficulties getting approved.
CMHC insurance is the name used most often for mortgage default insurance, but is not the only provider. There are two other mortgage insurers in Canada – Genworth Financial and Canada Guaranty. Both of them still provide mortgage insurance for properties over $1 million.
The number of Canadians choosing self-employment is increasing every year. That’s why, says CMHC chief commercial officer Romy Bowers, these changes are happening. “These policy changes respond to that reality by making it easier for self-employed borrowers to obtain CMHC mortgage loan insurance and benefit from competitive interest rates.”
If you’re self-employed and looking for a mortgage, you should still compare the best mortgage rates in Canada so you know what you might be able to afford.