CANADIAN MORTGAGE & HOUSING CORPORATION MULTI-UNIT FEES & PREMIUMS
CMHC mortgage loan insurance enables Approved Lenders to offer greater financing choices to borrowers providing standard rental housing accommodations in multi-unit residential buildings. Amortization periods may exceed 25 years with additional fees for amortization periods up to 40 years. The amortization period must not exceed the remaining economic period of the building,
The borrower must have experience and show the ability to manage buildings equivalent to the size and scope of the project being financed with a minimum of 5 years’ experience in managing rental properties. Alternatively, a third-party management company can be employed. The net worth of the borrower must be 25% of the loan amount being requested, with a minimum amount of $100,000.
If you have questions, CMHC can be reached at 1-877-MULTI-GO (1-877-685-8446) or https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/multi-unit-insurance
The minimum building size is 5 units providing self-contained units in a standard rental building. Maximum loan-to-value is up to 85% of lending value as determined by CMHC, this means the purchase price may not be the same as CMHC lending value, it will be whichever amount is less. This includes buildings for purchase, refinance with improvements and new construction. Purchase and refinancing of existing buildings with improvements when rental income isn’t interrupted during renovations have a loan-to-value of 75% of the as improved value or 85% value of the as is value. When rental income is interrupted 75% loan-to-value will be the maximum during renovations based on the as is improved condition. Any additional loan-to-value advances will be based on rental increases achieved. See the above link to CMHC for new construction projects.
The minimum Debt Coverage Ratio is a key indicator when CMHC analyzes a building for a maximum loan-to-value ratio. Rental properties for purchase with 5 or 6 units require a minimum debt coverage ratio of 1.20 and a debt coverage ratio 1.2 for refinancing. Rental buildings with seven or greater units require a debt coverage ratio of 1.20 for a 10-year term and with a term less than 10 years a debt coverage ratio of 1.30 is required. This is a key indicator for CMHC and is heavily weighted upon when deciding on a maximum loan-to-value, so please make sure it is included in the proforma you are using. Please take a look at the above Proforma tab.
Application Fees
Application fees are calculated on a unit basis and must be paid by the lender at the time of the application. If the application is withdrawn a portion of the application fees will be retained by CMHC. Usually, the retained portions amount to 10% to cover the cost of work done; however, CMHC will retain the full fee once a certificate of insurance has been issued. When financing is completed the application fee may be added to the overall insured loan amount. There may be additional charges based on circumstances. So, make sure you understand all the potential charges by CMHC. I want you to know that good communication with your lender will make sure there aren’t any unknowns.
Insurance Premiums
Effective Gross Income Met
- Sixty-five PERCENT LOAN TO VALUE = 2.60%
- Seventy PERCENT LOAN TO VALUE = 2.85%
- Seventy-five PERCENT LOAN TO VALUE = 3.35%
- Eighty PERCENT LOAN TO VALUE = 4.35%
- Eighty-five PERCENT LOAN TO VALUE = 5.35%
- Amortization extensions equals 0.25% for each five-year extentsion period beyond 25 years and up to 40 years.
- Inspection fee for 5 to 100 doors = $150-200 per doors
- Inspection Fee for 100 doors and greater = $100 per door to a maximum of $55,000.
The complete set of application fees and premiums is provided in the link below.