# buying the place next door: CMHC questions



## WalleyGirl (Mar 23, 2013)

We live on a 4 acre property. Our next door neighbour, who also has 4 acres, has indicated she would like to sell to us. 

Our plan is to rent out one of the houses (hers or ours) plus about an acre of land around it, and we will live in the other house and use the remaining 7 acres. We live in a small town and cannot reasonably expect to make a profit on the rent, but that is not our goal. Its more like a "mortgage helper" whereby we can effectively double our acreage size without doubling our mortgage payments. 

I'm assuming that the fact we aren't making money off this arrangement does not preclude CMHC from considering it an investment property and thus requiring 20% down? 

I understand that to qualify for the 5% downpayment option we would need to make the neighbour's house our permanent residence. That's fine, as it is nicer than our current home. But the site of the current home is quite lovely, and we may decide to put a new home on that site and live there, renting out the neighbour's house instead. It's hard to know whether we will want to do this as it depends on many factors that are unknown right now. 

My question is: if we purchase the neighbour’s home as a principal residence are we precluded from ever renting it out? Is there a minimum period we must live there before being allowed to turn it into a rental? I'm not trying to commit Occupancy Fraud: I'm okay with living in the neighbour's house for the long-term if that is what we must do, but I would like to know whether that means I can't relocate back to the old site. 

And no, we would not want to join the two properties into one strata title, which I guess would be one way around this issue.


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## Shayne (Apr 3, 2009)

The answer to your question is, no. Many people buy their principle residence with 5% down and later use it as a rental when they upgrade.

Is there a minimum? There is nothing indicating a minimum requirement. You will swear an affidavit at the lawyer's that the home will be owner occupied. As long as that is your intention when you swear the affidavit you should be ok. ie: A woman is getting separate and buys a new home to live in. Between swearing the affidavit and taking possession her and her husband reconcile. Then she rents it out.

I think it is really about your intention at the time you purchase it.

People's circumstances change, you are allowed to move and rent your place out but if that was your intention from the start there is a slim chance you could have issues. Either way, as long as the mortgage payments are made, no one is really going to care.

Don't take this as legal advice.


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## blueeyetea (Feb 27, 2013)

I thought you could only qualify for the 5% down once, since it's there to help people buying their first home. If you already own your home, and aren't planning to sell it, you're probably no longer eligible for the 5% down. At best, I think you can transfer your mortgage to your second property, but that doesn't help unless you already have a good portion of your mortage paid off. 

CMHC is not meant to help Canadians build real estate equity above and beyond their first home. What it also does is help residents make the first purchase sooner by guaranteeing that the mortage won't be defaulted on, hence why the down payment can be as low as 5%.


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## Shayne (Apr 3, 2009)

blueeyetea said:


> I thought you could only qualify for the 5% down once, since it's there to help people buying their first home. If you already own your home, and aren't planning to sell it, you're probably no longer eligible for the 5% down. At best, I think you can transfer your mortgage to your second property, but that doesn't help unless you already have a good portion of your mortage paid off.
> 
> CMHC is not meant to help Canadians build real estate equity above and beyond their first home. What it also does is help residents make the first purchase sooner by guaranteeing that the mortage won't be defaulted on, hence why the down payment can be as low as 5%.


Not correct. You can buy another place with 5% down if it is going to be owner occupied. They are not concerned about your previous home as to whether you are selling it or renting it out.


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## generalbrock (Dec 5, 2012)

This is a little off topic, but depending on where you live, you should make sure that you keep the properties under different ownership. I work in urban planning, and deal with people all the time whose properties have merged, and since they are in the Ontario green belt, they can't "unmerge". Of course this is different everywhere you go, but it's something to think about.


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