CMHC introduces changes to help self-employed Canadians own their own home

It’s no secret that Calgary’s resale housing market continues to struggle as a result of the lingering effects of an uncertain economy impacted by the collapse in oil prices which began in late 2014.

MLS sales in the city for the first half of this year were down 17.11 per cent from the same period a year ago to 8,553 transactions.

At the same time, active listings are up about 30 per cent from last year.

So anything that can help boost the struggling market – even something minor – is welcome news in the industry.

One thing that took place just recently that received little fanfare from the media was some changes Canada Mortgage and Housing Corporation made to make it easier for self-employed Canadians to get a mortgage and buy a home.

 

The federal agency estimates that about 15 per cent of Canadians are self-employed. After the economic downturn which led to recessions in 2015 and 2016 and thousands of layoffs, self-employment in Calgary and other Alberta centres became either many people’s only source of income or an opportunity to do something different. But for many self-employed, qualifying for a mortgage may have proven to be difficult as their incomes may vary or be less predictable due to the nature of their employment.

“Self-employed Canadians represent a significant part of the Canadian workforce. 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,” said Romy Bowers, the CMHC’s Chief Commercial Officer.

The changes recently made by the CMHC were made to give lenders more guidance and flexibility to help self-employed borrowers. Those changes are:

  • Providing examples of factors that can be used to support the lender’s decision to lend to self-employed borrowers who have been operating their business for less than 24 months, or in the same line of work for less than 24 months such as acquiring an established business, sufficient cash reserves, predictable earnings and previous training and education; and
  • Providing a broader range of documentation options to increase flexibility for satisfying income and employment requirements when qualifying self-employed borrowers such as the Notice of Assessment (NOA) accompanied by the T1 General, the CRA Proof of Income Statement and the Statement of Business or Professional Activities (T2125) to support an “add back” approach for grossing up income for sole proprietorship and partnerships.

Olga Coulter, Senior Account Manager, Client Relations with the CMHC, said self-employed individuals may have had some difficulty accessing financing in the past because typically a self-employed individual’s income source may vary, be unpredictable and harder to substantiate through documentation.

Coulter said the changes “may help the individuals get the required financing. However, we can never forget that it’s the lenders that lend the money – that provide the funds – so the lenders also have to follow their own guidelines first and they may or may not participate in the enhancements that we just put out.”

Coulter said the ranks of the self-employed is a growing demographic in Canada and the changes are in line to help that particular workforce and also falls in line with the National Housing Strategy – a 10-year, $40-billion federal government initiative with a goal to help Canadians access housing that meets their needs and that they can afford.

“It’s just increasing the flexibility to help Canadians overall – self-employment being one group.”

The CMHC changes take effect October 1.