Impact of New Federal Financing Rules on Large Multi-family Properties of 5 or more Units


In this blog post, I want to discuss the new federal financing rules for CMHC-insure loans that came out this past June because I noticed there is confusion among people including professionals in the business. Let me tell you this:


 What are the new rules?

The press release Finance minister Flaherty issued stated that the intent behind the new rules is to help ‘”hard-working Canadian families to save by investing in their home and their future…and help to ensure households do not become overextended”.

In other words, the concerns were over protecting Canadian families, not real estate investors.  Right off the bat, you know the new rules pertain to what CMHC considers ‘home ownership product” which is the category that small rental properties comprising 1 to 4 units are included in.  Small rental properties are considered homeownership product because presumably the owner could reside in one of the 4 suites whereas the ‘commercial residential’ product category, in which properties of 5 or more units fall into, are purely investment properties.

The new financing rules also state that for mortgages with loan-to-value (LTV) ratios of more than 80%:

  • The maximum amortization period is reduced to 25 years from 30 years;
  • The maximum LTV allowed is now 80%, a reduction from 85%;
  • The gross debt service ratio (GDSR) is now limited to a maximum of 39% and the total debt service ratio (TDSR) to 44%;
  • Limit the availability of mortgage-default insurance (CMHC insurance) to homes with a purchase price of less than $1M.

The GDSR and TDSR formulas are also indicators that the rules only apply to small rental product of 1 to 4 units as they take into account the borrower’s household income into the calculation of the debt service ratio whereas for apartment buildings of 5 or more units the borrower’s income is not used in the calculation of the debt coverage ratio (DCR). Multifamily properties must cash flow on their own irrespective of the borrower’s income. For loan terms of less than 10 years the DCR must me at least 1.3 and 1.2 for a term of 10 years or more.

The financing rules that still apply to multifamily properties of 5 or more units are the following:

  • Maximum LTV of 85% are theoretically available if your loan is CMHC-insured and 75% LTV if conventionally (non CMHC-insured). I say theoretically because CMHC rarely use market value to determine the LTV but rather they use a completely arbitrary lower value;
  • Maximum amortization of 40 years (CMHC) or 25 years on conventional loans,
  • GDS & TDS don’t apply to large multi-family properties
  • ONLY DCR applies. The pproperty must cash flow on its own irrespective of borrower income!

There you go folks! The financing rules for larger apartment buildings of 5 or more units have not changed in recent years. What does this tell us? Well! It tells us that investing in apartment buildings remains a safe low risk investment and the government sees no reason to change the rules.

In my next blog post, I’ll do a follow-up on Post # 6 about investing in smaller remote markets based on personal experience. This past summer, I had the joy of coaching my 30-year old nephew into his first investment in large multifamily properties.


1) Launching On-line of Multifamily Investing Course on January 31, 2013.  EARLY BIRD DISCOUNT PLEASE CLICK HERE: 

2)  Revised and Up-dated EBook ‘Canadian Blueprint for Multifamily Investing’  to be released and published on in January also.

3) Next Live Multifamily Investing Experiential Training Event in Edmonton on May 25 & 26, 2013. EARLY BIRD DISCOUNT AVAILABLE. CLICK HERE: 

Vancouver Real Estate Investor Forum


Award for Service Provider of the Year for my Live Multifamily Investing Experiential Training Event and Coaching, Vancouver Canadian Real Estate Investor Forum


David Chilton of the ‘Dragon’s Den’ TV show and author of the book ‘Wealthy Barber’. Very grounded and humble guy.

My good friends Julie Broad and Dave Peniuk of RevNYou and a few of their VIP coaching clients. What a great bunch of people.



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