Financing for multi-unit (5+ unit) residential buildings comes in two varieties:

* CMHC Insured
* Non-CMHC Insured

People with healthy down payments frequently ask why they’d ever want to pay the CMHC premium if they can simply get a conventional mortgage.

Let’s take a $500,000 loan at 75% LTV, for example, on a 5-unit building. CMHC’s premium is 2.25% for a 25-year amortization. That’s $11,250—not exactly chicken feed.

But here’s the thing. Lenders consider multi-unit financing to be much safer when it’s insured. That means there’s less of a risk premium and borrowers get better rates on CMHC-backed deals. “There is a 200 basis point difference between that and a conventional loan,” First National’s, Jeremy Wedgebury, told BrokerNews.ca.

What many don’t realize is that this 2% rate differential translates into big dollars. On that same $500,000 mortgage, a 2% lower 5-year rate would save almost $34,000 after accounting for the $11,250 premium and CMHC’s $750 application fee. Moreover, the property cash flows better because the payment is 16% lower.

In sum, with multi-unit apartments, “pay to save” is often a good motto.

http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2009/07/cmhc-insured-multi-residential-financing.html

reviewed by MOISHE ALEXANDER, CFC Canadian Funding Corp CEO

KENORA, ON, June 8, 2009

Canadian Funding Corporation – CFC – posts CMHC update. Mr. Greg Rickford, Member of Parliament for Kenora, joined with Naotkamegwanning First Nation and Chief Warren White to celebrate the grand opening of a new 10-unit seniors residence today, which was officially opened by Chief Warren White and will be home to more than 30 elders.

“The Government of Canada is committed to creating safe and affordable housing for Aboriginal people in Ontario and across the country.” said MP Rickford, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development Canada and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC). “This project provides area elders with access to safe, quality housing at an affordable cost.”

CMHC provided a housing loan of $1,064,000 to facilitate the construction of this seniors residence. CMHC will also provide housing subsidies for this project, which are estimated at $2.1 million over the term of the 25-year loan agreement.

“It’s been a long, prosperous journey and now we can express the wishes that our elders voiced years ago to develop a seniors residence in Naotkamegwanning First Nation,” said Chief White. “Through hard work, determination and negotiations with CMHC, it has become the greatest accomplishment for our community. We’re a community that believes dreams can become reality when we work very hard to achieve them.”

CMHC’s On-Reserve Non-Profit Housing Program assists First Nations in the purchase, construction, rehabilitation and administration of affordable on-reserve rental housing, and provides subsidies for First Nations people living on-reserve. The Government of Canada provides approximately $270 million in on-reserve funding each year to address housing need.

In April, the Government of Canada announced as part of Canada’s Economic Action Plan that it is providing $400 million in additional funding over the next two years to support on-reserve housing. These funds are dedicated to new social housing projects, the remediation of existing social housing and complementary housing activities through programming from CMHC and Indian and Northern Affairs Canada (INAC). This funding will also provide an economic stimulus for many First Nations and rural areas by creating jobs, developing skilled trades and supporting small businesses.

According to Canadian Funding Corp. (CFC), in a CMHC report dated May 22, 2009, Potters Hands Development Limited and the Canadian Mental Health Association (CMHA) celebrated the official opening of a 40-unit apartment building in downtown Red Deer. The Buffalo provides permanent affordable housing and support services to persons living with addiction or mental illness.

Canadian Funding Corp adds that the Buffalo project was officially opened today by Earl Dreeshen, Member of Parliament for Red Deer, on behalf of the Honourable Diane Finley, Minister of Human Resources and Skills Development Canada, and Minister Responsible for Canada Mortgage and Housing Corporation (CMHC); Mayor Morris Flewwelling, on behalf of the City of Red Deer; Stan Schalk on behalf of Potters Hands, and Patricia Turnbull on behalf of CMHA.

“The Government of Canada is committed to making affordable housing available in Alberta and across Canada for those who need it most,” said MP Dreeshen. “With the opening of this housing project, persons with special needs in Red Deer will access suitable, supportive housing that will help them start a new page in their lives.”

“I commend the staff and volunteers of the Buffalo Housing First Program for taking the initiative to provide housing and support services for some of our most vulnerable citizens in Red Deer,” said Cal Dallas, MLA for Red Deer-South. “The program aligns with Alberta’s “Housing First” approach and serves as a model for government, stakeholders and community organizations in ending homelessness in Alberta.”

The Buffalo is owned by Potters Hands Development Limited and operated by the Canadian Mental Health Association. Funding for the project’s renovation includes $960,000 from CMHC’s Residential Rehabilitation Assistance Program (RRAP), $75,000 through CMHC’s Proposal Development Funding Program, and $854,000 from the Government of Alberta.

The Buffalo uses a “Housing First” philosophy which moves people directly into permanent housing from living on the streets or in shelters.  Staff members assist tenants with day-to-day tasks such as laundry, cooking and housekeeping. Support staff may also help tenants find suitable activities, volunteer or employment opportunities or medical services.

“The Buffalo has truly made a difference in the Red Deer community,” said Patricia Turnbull, Executive Director of the Canadian Mental Health Association. “Many men and women who were sleeping on the streets now have a place to call home.”

CMHC’s RRAP programs provide funding for home modifications to help the elderly and disabled remain independent in their homes. The programs aim to preserve housing for people at risk of homelessness. RRAP and related programs help to improve living conditions for seniors, persons living with disabilities, victims of family violence and Aboriginal peoples.

HUA’s Outreach Support Services program will provide $32 million in 2009/10 to address the underlying causes of homelessness. The funding supports community-based initiatives that offer client-centered services which include a variety of programming such as addictions counselling and life skills coaching.

Last fall, the Government of Canada committed more than $1.9 billion over the next five years to improve and build new affordable housing and to help the homeless. Canada’s Economic Action Plan builds on this with an additional one-time investment of more than $2 billion over two years in new and existing social housing and lending of up to another $2 billion to municipalities for housing-related infrastructure.