CMHC MLI Select Explained: Points, Down Payment and Amortization

What is CMHC MLI Select?

MLI Select is CMHC insurance for the mortgage on a rental property with at least 5 units (retirement homes need 50). Insurance protects the lender if the loan goes bad, and in exchange the lender can lend more, for longer, than it would on a regular commercial mortgage.

What makes Select different from standard CMHC multi-unit insurance is the points system. You pick commitments from 3 categories, add up the points, and each tier gives you a bigger loan, a longer amortization and a cheaper insurance premium. You need at least 50 points to qualify at all.

How do MLI Select points work?

Points come from 3 categories, and you can mix them. The more you commit to, the better the terms.

Limited recourse at 100 points generally means the lender's claim is limited to the building itself, with less reach into your personal assets. At 50 and 70 points the loan is full recourse.

How do you earn points for affordability, energy and accessibility?

• Affordability. A share of units must rent at or below 30% of the median renter income for the area. 40% of units earns the 50-point tier and 80% of units earns the 100-point tier. The commitment lasts at least 10 years, and committing to 20 years adds 30 bonus points.
• Energy efficiency. For new construction, CMHC scores the building against the national energy code, from at least 25% better (50 points) to at least 60% better (100 points). Existing buildings are scored on the improvement a retrofit delivers, so the points cost money up front.
• Accessibility. Every unit has to be visitable as a baseline. Making at least 15% of units accessible earns 50 points, and full universal design earns 100.

For an existing building, affordability is usually the cheapest route to points, because it asks you to hold rents under a ceiling and leaves the walls alone.

What does 50 vs 100 points change on a 6-unit building?

Here's an example. Take an existing 6-unit building appraised at $2,400,000. The only thing that changes between the 2 columns is the points tier.

The 100-point version leaves $240,000 more of your cash free for the next purchase, and the 50-year amortization lowers the monthly payment on the bigger loan. The cost is that 5 of the 6 units (80%, rounded up) would have to stay at or below the affordable rent ceiling for 10 years or more.

The percentages are the most CMHC will insure. The rent still has to carry the payment. CMHC needs the building's net operating income to cover the mortgage payment at least 1.1 times for a standard rental, so a building with low rents may qualify for less than the full 95%.

How many rental properties can I finance in Canada?

There's no national limit on how many rentals you can own, but each lender sets its own limit on how many mortgages it will hold for you and how much rental debt it will count against your income. At some banks that ceiling arrives after a handful of properties, and from there the next mortgage has to come from a lender that works with larger portfolios.

MLI Select changes the math because a building with 5 or more units is judged mostly on its own rent through the debt coverage test above, and your personal income carries less weight. One 6-unit building on one insured mortgage can hold more doors than 6 separate condos, each needing its own approval and its own 20% down.

If you're still at 1 to 4 units, the rules are different. Those are residential mortgages, qualified on your income plus part of the rent. Our investment property mortgage guide covers how lenders count that rent.

Who does MLI Select suit, and who should skip it?

It suits a long-term holder buying or building a rental with 5 or more units who wants to keep cash free for more buildings and is comfortable with rents that sit at or below the affordable ceiling. It also suits builders, since new construction can reach 95% of cost at the 50-point tier.

It fits poorly if you plan to sell or renovate and raise rents within 10 years, if the building's rents are already well above the ceiling and would have to come down, or if the rent roll can't meet the 1.1 debt coverage test at a high loan amount. In those cases a smaller loan at 50 points, or a conventional commercial mortgage, can leave you with more room to run the building your way.

What does applying for MLI Select involve?

The lender submits the application to CMHC, not you. Expect to supply a rent roll, operating statements, an appraisal, and for new construction the budget, plans and energy modelling. The affordability commitment is written into the loan, and CMHC can check it for the life of the commitment.

Timelines run longer than a residential mortgage, so start before you firm up a purchase. Our INVEST framework walks through how we structure a multi-unit file, and the deal analyzer tests whether the rent carries the debt.