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The Self-Employed Gross-Up Rule Still Sits at 15%, But OSFI's Application Keeps Changing Your Multiple
CMHC still adds 15 percent to your declared income when you apply for an insured mortgage. The rule has been in place for years. The floor keeps moving, and the moving part changes how much house the gross-up actually buys you.
The 15 percent gross-up exists because self-employed borrowers write off expenses that salaried borrowers pay from after-tax income. A contractor who nets $80,000 can write off vehicle costs, a portion of home internet, sometimes travel. An employee earning the same gross pays for those items with money the tax system has already touched. The gross-up attempts to level the comparison. For sole proprietorships and partnerships under CMHC's insured mortgage program, your $80,000 becomes $92,000 for qualifying purposes, which increases the mortgage you can carry by roughly $60,000 on a typical file.
The qualifying rate you apply that inflated income against changed. At least since 2018, OSFI set the floor at the contract rate plus 200 basis points or 5.25 percent, whichever is higher. When offered rates sat below 3 percent at least since 2018, every file used the 5.25 percent minimum. When rates climbed past 5 percent in 2023, the formula flipped: you now stress-test at your actual rate plus two full points.
The arithmetic matters because the benefit of the gross-up shrinks as the qualifying rate rises. At 5.25 percent, a $12,000 income boost from the gross-up adds $61,000 to your maximum mortgage. At 6.5 percent, the same $12,000 adds $55,000. At 7.5 percent, it adds $51,000. The haircut is structural. Higher rates compress every borrower's purchasing power, but self-employed buyers lose twice: once from the rate itself, once from the way the gross-up scales with it.
The 15 percent has not moved since CMHC published the rule. The multiple it produces has dropped by 15 to 20 percent depending on where rates sit when you apply. If you are planning to buy or refinance as a self-employed borrower, the calculation has to run at today's qualifying rate, not the rate you remember from years past. The gross-up still helps. It just helps less.
Sorting out how the numbers land on your file takes someone who runs this math daily. We do. Book a call.
CMHC still adds 15 percent to your declared income when you apply for an insured mortgage. The rule has been in place for years. The floor keeps moving, and the moving part changes how much house the gross-up actually buys you.
The 15 percent gross-up exists because self-employed borrowers write off expenses that salaried borrowers pay from after-tax income. A contractor who nets $80,000 can write off vehicle costs, a portion of home internet, sometimes travel. An employee earning the same gross pays for those items with money the tax system has already touched. The gross-up attempts to level the comparison. For sole proprietorships and partnerships under CMHC's insured mortgage program, your $80,000 becomes $92,000 for qualifying purposes, which increases the mortgage you can carry by roughly $60,000 on a typical file.
The qualifying rate you apply that inflated income against changed. At least since 2018, OSFI set the floor at the contract rate plus 200 basis points or 5.25 percent, whichever is higher. When offered rates sat below 3 percent at least since 2018, every file used the 5.25 percent minimum. When rates climbed past 5 percent in 2023, the formula flipped: you now stress-test at your actual rate plus two full points.
The arithmetic matters because the benefit of the gross-up shrinks as the qualifying rate rises. At 5.25 percent, a $12,000 income boost from the gross-up adds $61,000 to your maximum mortgage. At 6.5 percent, the same $12,000 adds $55,000. At 7.5 percent, it adds $51,000. The haircut is structural. Higher rates compress every borrower's purchasing power, but self-employed buyers lose twice: once from the rate itself, once from the way the gross-up scales with it.
The 15 percent has not moved since CMHC published the rule. The multiple it produces has dropped by 15 to 20 percent depending on where rates sit when you apply. If you are planning to buy or refinance as a self-employed borrower, the calculation has to run at today's qualifying rate, not the rate you remember from years past. The gross-up still helps. It just helps less.
Sorting out how the numbers land on your file takes someone who runs this math daily. We do. Book a call.
Sources
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