This product was introduced in 2007 in response to industry competition. The product allowed self-employed borrowers who were unable to provide traditional sources of income validation to access CMHC insured financing for a 1-2 unity owner occupied property. For self employed individuals, income validation documentation would include if you were a sole proprietor, the last two years of T1 Generals with financial statements and Notice of Assessments. If you were incorporated, income validation would included the last two years Notice of Assessments and T2 Generals with financial statements. Sometimes these documents were unavailable or due to the ability of writing off expenses for income tax the income for the year would be low and not a true representation of the income. If this was the case, CMHC would allow the income to be stated. The stated income had to be reasonable.
What does the loss of this product mean to the consumer?
This means that going forward the self employed consumer will have to prove their income through providing their notice of assessments, audited financial statements or unaudited financial statements prepared by an independent third party, for the previous two year period. Anyone who is looking to do an insured deal (less than 20% down) and are self employed, will have to be self employed for at least two years in order to use the CMHC revised product. Or you will need to have a lender that will use another insurer of which we have two, Genworth and Canada Guaranty.
What was the second home product?
CMHC introduced its Second Home product in 2005. If a borrower was purchasing a second home (for instance for children to live in while going to university or cabin at the lake), the CMHC Second Home product offered borrowers more financing options when purchasing an owner-occupied second home. This meant that you could purchase your second home with less than 20% down payment.
What does the loss of the second home product mean to the consumer?
This means that if you are going to buy a second home with less than 20% down, your lender will no longer be using CMHC. You will have to have at least 20% down in order to do the purchase or use another insurer of which we have two, Genworth and Canada Guaranty.