by Vito Campisi
TAKE ADVANTAGE OF THE PREMIUM REDUCTION AND POTENTIAL HIGHER LOAN AMOUNTS.
In January 2012 CMHC announced some welcome enhancements to the policy for energy efficiency with a two year pilot to support the construction and retrofit of multi-unit energy efficient properties. Since energy efficiency improvements are top of mind for most property owners and regularly undertaken, you could be missing out on a benefit from this incentive if you are financing or refinancing your property. In addition to a premium reduction, a very important component of this policy is that CMHC will continue to include the anticipated lower energy costs when calculating net operating income to determine property lending value. A higher lending value will mean a higher loan amount for you, the borrower.
For New Construction projects to qualify, the building is required to be the higher of: 5% more energy efficient than if constructed to meet provincial/territorial requirements (where they exist), or 20% more energy efficient than if constructed to meet the Model National Energy Building Code for Buildings (MNECB). A premium reduction/refund of 10% of the premium paid or due will be provided.
For Existing Buildings (Retrofits), there is no minimum threshold for anticipated reduction in energy consumption. The premium/refund will be equal to the overall percentage reduction in energy consumption (heat, hydro, water) to a maximum of 15% of the premium paid or due.
It should be noted that the reduction in energy consumption must be the result of the owners’ or builders’ capital investment in the property.
Borrowers are required to provide and demonstrate an estimate of the anticipated or actual reduction in energy consumption. This reduction can be demonstrated through a variety of documents, but not limited to: design proposals or energy retrofit plans and post commissioning reports or post retrofit reports prepared by qualified energy management professionals (in-house reports must be validated by a qualified external third party); reports from other qualified government agencies and energy companies that provide grants; two years of energy and/or water bills (to demonstrate reduction in annual energy consumption).
Based on when the reductions in energy consumption are demonstrated, borrowers have the option of either receiving a premium reduction or a premium refund. Your Approved Lender will be able to advise you on the process.
Borrowers must also submit the required documentation to the Approved Lender within 12 months after the loan has been finalized.
This information has been extracted from a CMHC publication that is exclusive to Approved Lenders. If you are interested in pursuing the benefits of the CMHC Enhancements to Multi-Unit Energy Efficient Properties, I recommend that you consult and discuss the policy with the Approved Lender of your choice.