Muhammad Arif Omari, a driver from Edmonton, was set to renew his mortgage in September when he was told he wouldn’t be able to switch to a new lender offering a lower rate because he was self-employed.
Mr. Omari, a truck driver who did not like the long stretches away from home, quit his job over the summer after many years, with plans to become a self-employed cab driver. But he soon learned no new lender would approve a mortgage under the circumstances, despite the fact he had enough savings to cover payments and other household expenses, and his wife was employed.
"I was told [by a mortgage broker], ‘Just stick with your bank. No matter that the interest rate is greater – you have no other choice for now,’ ” he says. Being unable switch lenders meant renewing at a rate that was 25 basis points higher than what a competitor would have offered (100 basis points equal one percentage point).
New guidelines from Canada Mortgage and Housing Corp. (CMHC) come into effect Monday that could make it easier for self-employed borrowers such as Mr. Omari to qualify for financing. The changes apply to borrowers putting down less than a 20-per-cent down payment and seeking CMHC’s high ratio default insurance, as well as, in certain cases, where borrowers are putting down more than 20 per cent but default insurance is required by the lender.
The move falls in line with the federal government’s Canadian Housing Strategy, a 10-year, $40-billion plan to help more Canadians access affordable housing.