Plenty of homeowners are relying on a basement suite or a laneway house to help get them into Metro Vancouver’s hot housing market.
Mortgage broker Sherlock Yam says changes to Canada Mortgage and Housing Corporation (CMHC) rules coming at the end of September could be another big help for those looking to legally rent out part of their newly purchased home.
“Previously, CMHC rules allowed only 50 per cent of the rental income to be added towards qualifying for your mortgage,” said Yam. “Now it’s increased to 100 per cent.”
If a secondary unit brings in about a $1,000 in rent monthly, being able to include all of it, rather than just half, would add another $6,000 in household income a year. That equates to about $25,000 of extra buying power added to a mortgage.
The rule change is also intended to add rental units to an already strapped supply, even pushing potential sellers to include rental opportunities to attract this new group of buyers.
Overall, the added boost may be even better than recent interest rate cuts.
“For those people, this has increased their borrowing power by more than they benefited from that recent Bank of Canada change,” said Tsur Somerville, director for the Centre for Urban Economics and Real Estate at UBC.
Still, Sommerville says don’t expect these new buyers to drive Metro Vancouver’s housing market much higher.
“The thing is that it’s got to meet all the other CMHC requirements,” he said. “So it’s people putting less than 20 per cent down; people buying a house that’s $1 million or less. When you start doing all those sorts of things, I’m not sure the number of people is really huge.”
For those who do apply, the added cash from renting out might just be enough to finally buy in