Imagine this: you only need $100K in capital to buy a house in Toronto, and that’s also enough to renovate and add more units to increase your rental income. Sounds great, right?
But here’s the catch—you need to make at least $200K a year to qualify for this substantial loan size, and either you or someone else must live in one of the units. So, realistically, this option is available only to a select group of people.
This is part of a new mortgage program from CMHC, which is different from another popular program you might have heard about—MLI Select. So, how do these two programs stack up against each other? Let’s break it down.
What’s New with CMHC’s Residential Construction Financing Program?
CMHC has been making some big moves lately. They’ve extended amortizations from 25 to 30 years, raised the value cap from $1M to $1.5M, and now offer up to 100% construction financing for up to 4 units—as long as you or a relative live in one of those units. These changes will go into effect starting January 15, 2025.
How Does the Process Work?
Here’s a simple example of how it works.
Let’s say you purchase a single-family, two-storey semi in Toronto for $900K. You put down 7.5% with a CMHC-insured mortgage, and you plan to add 2 more rental units.
First, you’ll need to get the drawings done and apply for a permit. Once approved, you can apply for CMHC construction financing to cover the renovation costs, which might be around $100K. Keep in mind, with nearly $1M in loans, you’ll need an annual income of over $200K to qualify.
The Living Situation: Basement or Upper Unit?
If you decide to live in the smaller basement unit, you might sacrifice some space, but you could potentially live rent-free.
Alternatively, if you occupy one of the larger, more desirable upper units (which rent for more), you can still reduce your monthly home expenses while building equity over time.
Comparison With CMHC MLI Select
While this new CMHC residential construction financing program focuses on smaller residential projects (up to 4 units), it differs from CMHC’s MLI Select program, which is geared toward larger commercial projects with 5 or more units. MLI Select allows you to borrow up to 90% of the construction cost, but it requires more upfront capital.
The new residential program is much more accessible for smaller projects, especially for first-time homeowners who don’t have an existing property with equity to pull from for a HELOC. This gives a wider range of people the chance to borrow and build without needing to already own property.
The toughest part of qualifying for this program is meeting the income requirement, as it’s all based on your personal income. So, it’s really only available to a smaller subset of buyers who meet the criteria. But if you do qualify, this program could be a game-changer for your next project.
How We Can Help
We’re currently in a buyer’s market, and that’s a pretty exciting time for investors. With lower interest rates and prices, the cash flow and investment opportunities look stronger than they’ve been in a while. As rates continue to drop, affordability improves, which could lead to a rise in prices down the line.
So, if you have the capital, mortgage qualifications, and the desire to invest in Toronto real estate, now might be the right time to jump in. And if you’re unsure about where to start, don’t worry—our team is here to help you figure it all out!
Our real estate sales brokerage specializes in multifamily properties, whether you’re looking for a ready-to-go multiplex or want to convert a single-family home.
Here’s what it’s like to start as a client with us:
- Initial Consultation: We’ll talk with you to understand your needs and teach you how to invest wisely in Toronto real estate.
- Market Search: We’ll search the market to find the perfect property for you.
- Renovation Support: If the property needs renovations, our trusted contractors are ready to help, and we’ll support you through the whole process.
- Leasing and Management: If you need help renting out and managing your property, our leasing and management team is here for you.
Ready to get started? Click on the link below, and let’s start working together!
What Toronto Real Estate Investment Is Right For You?
Check out our complete Toronto real estate investment guide for all the details and real-life examples. If you’re ready to dive in, just book a call with us!
