1.0  Self Employed Program Changes:  CMHC is announcing policy changes to the CMHC Self-Employed Product Without Traditional Third Party Validation of Income.  Long story short, we are currently able to substantiate a self employed individuals' income by reviewing their personal and business financials, and submitting a fair income figure to the lender based on industry, tenure, actual revenue of the applicant, etc - without having to verify through third party documents.  This product was used to help self employed borrowers attain financing who found it difficult to document income for many reasons - extensive write-offs, how they draw income from their companies, the nature of pay in their business, etc.  It is a wonderful product, as many self employed borrowers do not qualify under the traditional 2 year average of personal tax returns.  The new policy will not allow access to this program to anyone who is commission based, or to anyone who has been self employed with their same business for greater than three years.  These borrowers will now have to qualify under traditional means (income will have to be substantiated on paper).  CMHC states that this program was and is typically intended for those who are newly self employed and have a hard time proving their current income level.  FURTHER:  This program will now be only 90% loan to value - meaning 10% down payment required opposed to the current 5%, and for refinancing will now be up to 85% loan to value opposed to the current 90%.

1.1  What does this all mean?   Self employed individuals have one less option when it comes to qualifying for a mortgage.  Typically, the amount of mortgage seasoned self employed individuals can qualify for will decrease if it must be based on paperwork that they provide. 

2.0  Qualifying Interest Rate:  There's been much speculation about this change - exactly what rate are qualifications going to be based on?  The Finance Department announced its official new rules:  For mortgages over 80% loan to value (and therefore insured through CMHC), the borrower must qualify with the greater of the 5 year benchmark rate or 5 year contract interest rate.  The benchmark, or posted qualifying rate, will be published by the Bank of Canada each Monday at approximately 12:01am Eastern Time.   The contract rate refers to the rate a bank is offering.  If a mortgage has multiple components (ie, a mortgage and a line of credit), the borrower must qualify for both facilities based on the benchmark/contract rate.  To note:  If a borrower wants a variable rate they still must qualify at the benchmark/contract rate.