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Hi, everyone. How are you? It's Leah Coss with The Mortgage Centre. I have tried to do this blog post. It's going on about six times now, and I've come to the conclusion that the topic is so overly complicated, convoluted, and most of the banks and lenders don't even know the programs themselves. To try and articulate that in layman's terms, it's not working if I'm trying to keep this video under four or five minutes. So, I'm going to tell you, the main objective for this post is, if you have a rental property, if you have a house with a basement suite, and you're collecting income cash, you do not want to do that anymore. I know it doesn't sound good. You're going to be paying tax on this income. But you have to be filing taxes. You've got to do your accounting on it. You've got to start showing a profit or loss based on this property.
So that's the main objective of this thing. But I'll tell you why this is overly complicated. Before, there was a whole bunch of changes last month, concerning mortgage insurers as well as lenders, as well as government policy concerning rentals. The first change was a government mandate where, if you buy a rental property, meaning I live here but I'm buying a house over there that I will not be living in, you now have to put 20 percent down. That's a firm change. Another change is how you can use that income. And this is not government mandate; this is insurer policy.
And to give you an example, if you were putting less than 20 percent down, and you had a rental property currently or were looking to buy one and you were putting less than 20 percent down, say you collected 1, 000 dollars worth of rent, before, I could get it so that you could use 800 dollars of that money to go towards helping you qualify for a bigger and better home. Now, you can only use 250 dollars with one mortgage insurer, and of that same 1, 000 dollars, 320 dollars is the max, if you're putting less than 20 percent down. All right?
The only way around that is, if you declare your income and file income taxes, then what we can do is just simply look at the profit or loss, and on your debt service ratio, which is the calculation that we as mortgage brokers to do qualify you, we get to eliminate that mortgage payment altogether. So, ipso facto, layman's terms, it's a lot better for you. OK? So you need to start declaring income.
As well, if you've had this property for over two years and there is no filing of it, CMHC, the government backed mortgage insurer, will not let you get this property. They're government backed. They aren't going to let you take income under the table. They're just not allowed. They're government. OK? So it's really important that you start declaring your taxes.
That being said, it's a whole other set of rules, and it's totally individual lender to individual lender on what they decide to do. But if you put more than 20 percent down, then it's a whole other set of rules. And I can still get it so that, of that $1, 000, I can use $800 to help you qualify for something better. But even then, you're going to have to start filing those taxes on that money. It's going to be more beneficial for you, and a lot easier, because you'll have a wider selection of people that we can send you to if we use a CMHC. If you don't file taxes, I can only take you to Genworth people, and you know what? Even Genworth is wanting you to file. They're following suit.
So, file. Yeah, file. That's all I can tell you. If you have any questions, or if you're in a situation where you want to buy a rental, a house with a basement suite, or if you currently already own rentals and you're looking to buy something or sell something, talk to me or talk to a mortgage broker. Do not go to a bank, because a bank will only pigeonhole you into the mortgage insurers they use and their internal policies, and chances are you will not get the best deal or the highest qualification.
But give me a call. I'm more than happy to just even answer the questions. No pressure or anything like that. And I guess that's about it. So, good luck on that. It's really complicated. Don't try to figure it out. Just trust the experts. And I'll talk to you later.
http://MortgagesInVancouver.com
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