CMHC MLI Select is a multi-unit mortgage loan insurance product backed by CMHC and designed for properties with five or more units. It is a commercial product, meaning the property qualifies for the mortgage based on its Net Operating Income, which must be at least 10% more than the annual mortgage payment. The units must be in the same building, on the same legal lot, or on different legal lots but attached.
The MLI Select program requires buildings to qualify on a 100-point system with three buckets: Affordability, Energy Efficiency, and Accessibility. Under affordability, investors must keep a percentage of units below market rent for 10 years. Under energy efficiency and accessibility, investors must improve the building to meet specific codes.
There are real costs to keeping units below market rent for an extended period, making the building energy efficient, and making it accessible, plus an insurance premium added to the loan amount. Investors must weigh these costs against the benefits because sometimes the standard CMHC program is the better financial move. You should not just look at the 95% loan-to-value and 50-year amortization.
CMHC uses its own internal data regarding market rental benchmarks and vacancies in the area rather than relying on the appraisal report. In one deal, CMHC assigned a higher vacancy rate than the appraisal, which impacted the property's Net Operating Income and directly reduced the loan amount. This internal math can unexpectedly slash your approved financing if you are not prepared.
At 95% loan-to-value, there is a very narrow margin for error because it represents high leverage. Unexpected events can eat into your cash flow significantly, so investors need to underwrite deals conservatively. High leverage equals high risk.
