# CMHC Mortgage – Owner Occupied Rental Income Property



## Ag Driver

In an ideal world, I would like to purchase a house, rent rooms out to students, live in said house, all while they pay for my mortgage. 

*Scenario 1*
I am looking at potentially purchasing a 5-6 bedroom, 3 bathroom house in a University town that is currently full with 5 rooms rented (100% for the previous 4 years). It is within a 5 mins walking distance from campus. From what I gather, 50% of rental income from a rental unit can be put towards net income to qualify for the mortgage. Here is where it gets complicated. If I have read correctly, CMHC defines income property as “units”. These units must be “self contained”. So regardless of the number of rooms, one house is considered one unit. Is this correct? (ie. 5 Rented rooms at $500 is not a $15k increase in net income). What are my other options as to how to approach CMHC to better help me qualify? 

_*tongue-in-cheek*_ Slapping a lock on each and every door isn't considered self contained?  

*Scenario 2*
If Scenario 1 is not plausible and received the expected response; – I will be purchasing a 3 bedroom, 2 bath house, single car garage (no current tenants) with intention to rent 2 rooms out in a college town. If this is only considered as 1 unit, can I add at least one room's income at 50% to my current income to qualify?

Hopefully the 2 different, yet similar questions are clear enough. Looking forward to some input! 

Ref:
http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/mupr/upload/Multi-Unit-Student-Housing_E.pdf
http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/mupr/upload/Multi-Unit-Purchase_E.pdf
http://www.cmhc-schl.gc.ca/en/hoficlincl/moloin/mupr/index.cfm


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## andrewf

Why not speak to a mortgage broker?


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## Addy

I agree with Andrew, speak to a mortgage broker. If you want to speak with someone simply for information purposes I can pm you someone if you like. We have purchased a house with more bedrooms than we need, and so we rent one or two bedrooms out on a regular basis, often to university co-op students for 3-4 months at a time. It really helps as we live in a small town where there is little (only min wage) employment for me, so the room rental helps us considerably.

When you rent rooms out, I have yet to find a mortgage lender who will qualify the room rent as income towards qualifying for a mortgage. Scenario 2 may qualify but only if you're not living in the house. If you do things legally, you may not be able to section off the house with a lock if there's no egress for emergencies, etc.

Either way, make sure your home insurer is aware you have others living in your home, our insurance only allows us to have two adults in the house other than family, some do not allow it at all. May seem crazy but if something happens to your house, you may not be insured.


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## Just a Guy

Having been a landlord, I'd NEVER live in the same place as I rent. 

Also, you need to be careful, running a "rooming house" requires zoning and other issues you may not be aware of that will cause you all sorts of potential headaches you haven't considered


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## marina628

The banks would need signed leases to qualify the income on the application ,once they can verify the income then they submit the application to their underwriters who send it on to CMHC.IE if you wanted to purchase a house and have a couple friends move in and pay you rent ,you would get them to sign a lease for 12 months and the bank will then take 50% of that income into consideration.If the property is registered as a rooming house you may have a issue getting a high ratio mortgage.


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## Ag Driver

andrewf and Addy - For now, I have a meeting with my credit union. I do have a distant friend that is a mortgage broker. I worry about fee's, but this is probably an appropriate time to use one. Addy, in both scenarios I will be occupying the house as well. Thanks for the tip about declaring this to insurance. 

Just a Guy - As for owner occupied -- I think living in the same place isn't an awful idea. In a sence it would keep tenants in check. I am also away for work 5 months of the year. Hopefully time away will keep what little sanity I have in tact. I am used to the company housing life style through work. A licensed residential rooming house in the city I am looking at is a mere $25 and requires a property inspection by the fire department every two Years. I'm sure there is more to it than that, but at this point in time, it doesn't appear to be too daunting. Right now, I am unsure if it is currently licensed. All in all, you are right, I am probably not aware of all the potential headaches. 

marina628 - Do you have any references that CMHC will accept the proposal? I have given references that state otherwise, and I also have been told via e-mail from my credit union that leads me to believe CMHC will not qualifying me on "room" income. I will confirm after my meeting later this week. As for lease agreements, it is easy to prove property income and current lease agreements can be provided if need be.


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## marina628

When it comes to CMHC nobody can tell until you do the application but I know of a friend who bought in 2009 with 5% down and he used a lease from a friend of his stating he will rent a part of the house for 12 months plus his own income.My friend had very good income and about 10 years at same job ,strong credit position.Rooming house may not qualify though ,I suppose it depends how you present the application .Can you carry the home without any tenants?CMHC may expect to see you can afford to carry it on your own .


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## Cal

Ag Driver said:


> I do have a distant friend that is a mortgage broker. I worry about fee's...


Usually the lender pays the mortgage broker.

Sorry if I misinterpreted that statement incorrectly.


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## Ag Driver

Cal - You read that right. I did not know that the service is "free" to the end user, thanks for the clarification.

Everyone - Thanks for the words of wisdom and basically confirming everything. I just wrapped up a meeting with my credit union and it is in fact true that you can not use rooms as income. From the sounds of it, best case scenario, they will consider ONE room provided you can prove it as self contained (ie Duplex or separate entrance....so on and so forth). The thought was there, but regardless I came away from the meeting very happy. I am in a much better position now then when I went through this mortgage information exercise last year. This year I came away with 260k based on my income alone, for an easy pre-approval -- so I am more than happy. This will buy a _very _nice 3 bedroom, 2 bath, and single/double car garage in my college town. I think I will be pursuing this option come September-ish.

I think the new game plan now is to either go for the 175k range home with 20% down (avoid CMHC), or 260k range with 5-15% down based on my income alone. Reaching 15% for the 260k will save me 1% on CMHC, I will try for 20%, but that is a stretch. Both options I will plan to rent out 2-3 rooms and double down as often as possible.

Basically I was told that CMHC's aim to put houses in the hands of those who need help vs investing in income properties. Makes sense...but it's too bad it won't work out!


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## andrewf

Good luck!


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## kubatron

I can't believe people still take the time to go visit a bank instead of calling a broker. I could have told you that in 5 seconds what the CU told you after you drove, parked, visited, and were denied.

CMHC's original goal was to put houses into the hands of those who needed help back when the war ended. Now I'm not so sure that's their goal, except to say their goal isn't to help investors as you've said.

Anyways next time - just call a local broker who will guide you through the process! Quicker easier and free.


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## Ag Driver

To give my credit union lady some credit (pun intended), she did outline CMHC's rules in an e-mail and stated it was not going to be possible. Had I known that you can gather up free advice from a broker, I probably would have inquired about the 300k with a broker to begin with.

All in all, I like walking into my credit union, being offered a coffee, putting my name in for all kind of draws, and shooting the $hit about my money and future. Regardless, I needed to see where I stand in terms of my GDS and TDS and what amount the credit union would give me. I always learn a lot, and I like the casual one on one conversions. I also opened up an RRSP at the same time. Typically I will not walk into my credit union if my to-do list can be done over an e-mail.

There are pro's to the brick and mortar though! Last years mortgage exercise I walked out with a free coffee, free lavender plant, free recycling bin, and $300's in gift certificates at Future Shop...This is reason number 562 I hate my bank and love my credit union! 

But yes, Thank you, I will just call a broker next time!


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