Investment Property Mortgage
Have you tried to get details on investment property mortgages and received strange answers? Been to your local bank asking about investment property mortgage rates? It is likely that your local Canadian bank branch doesn't have a clue. They are usually not set up to deal with questions from investors and they usually don't know the details.
Due to this, they could end up scaring you off from doing any real estate investing altogether. Our experienced mortgage brokers can serve you better in this area. Contact us today to have the right information about the latest Investment Property mortgages.
What should you know about Investment Property Mortgages?
The one thing that all of us need to keep in mind is that these mortgages are ever changing. If you approach a bank for help, they may be confined to the mortgage programs that they offer. It is possible that they don’t know of other similar mortgage programs and will not tell you. It is best to ask a mortgage broker, who will inform you about the latest Investment Property Mortgage schemes. You can then work with your broker to find a program that suits your requirements the best.
How does mortgage for any investment property work?
Investing in any income property is a great decision and can also provide you with an additional income stream for years. Owning an income property is different than owning a primary residence; and getting a mortgage for any rental property that you are interested in, is much different than getting a conventional mortgage.
You need to determine if you’re dealing with an income property, an owner-occupied property, or a second home for that matter. If you’re applying for a second home and not a mortgage for investment property, you need to tell your lender because you will need an entirely different mortgage for a second home.
If you need a mortgage on any rental property, you need to decide if you’re going to live in the home with the tenants or if you’ll have your own home. If you’re the owner of a single-family home that you rent out, you need to apply for a standard rental property mortgage. However, if you own a duplex or triplex, and live within one of the units, you’ll need to apply for an owner-occupied mortgage.
Owning an income property is a very prosperous and exciting thing; but applying for the mortgage of an investment property can be an arduous chore. When you’re ready to boost your income, contact our mortgage brokers. We can help you through the process, and really make sense of it all for you.
Mortgage Basics and Tips for Rental Properties in Canada
- When you also live in the property (say upstairs and there is a legal downstairs apartment) your down payment can be as little as 5% (10% if the property is a 4-plex)
- When the property is non-owner-occupied, the down payment requirement is at least 20% and may be higher depending on your situation and other properties owned.
- Depending on the location of the property, lenders may require a mortgage to be CMHC-insured regardless of down payment
- Rental income can be used to support the mortgage application. However, the rules for applying rental income in order to make a mortgage approval work are very complex. Work with a mortgage professional who knows and owns revenue property!
- Amortizations can be 30-35 years, which serves to lower the mortgage payment and increase cash flow. TIP: use surplus cash flow to pay down your own mortgage where interest expense is not tax-deductible.
- Interest rates are very competitive, although potentially 0.10% higher for non-owner-occupied homes.
- If you want to own multiple properties, choosing lenders in the right order is very tactical. For example, if a lender will only approve you if you own 2 properties or less, then going with that lender for your first rental property might make sense, as you are immediately ineligible for further properties with them afterwards. Again, work with a mortgage professional who understands revenue property mortgages.
- While owning properties in a corporation may seem appealing from a tax perspective, it is much more difficult to finance in a corporate name vs. your personal name, so it could limit your goals.
Here are Important Questions We Will Ask You..
- How many properties do you own already, in addition to principal residence?
- How many do you want to buy/own in total? (more than 4? more than 15?)
- Properties held in personal name, holding company, or operating company?
- How do you earn money besides rental properties? (don't give up your job!)
- Is your goal to renovate & sell/flip, or a long-term hold for capital appreciation?
- How much money available for down payment and source of this money?
- Suite status in target property – legal or illegal?
- Do you need funds to improve the property upon purchase?
With your answers, we can help tailor an income property financing strategy that works for you. Please let us know what questions you have - we'd be happy to provide a pre-assessment.
At One Mortgage Group, our mission is to set a high standard in the mortgage industry. We are committed to quality customer service - putting the people we serve first.
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