Things You better Know
Have you thought about investing in a property?
Perhaps you would like a place to rent out. You can build equity while someone else pays your mortgage, or you may need a place for your child to live in.
If you’re aiming to accomplish those goals, investing in a new property (or multiple properties) might be the best route. However, there are a few key factors to consider before you make your move.
You should be aware of some financing hurdles aside from finding a good tenant.
Mortgage Rules for Investment Properties!
In 2016, the Department of Finance tightened the rules for mortgage lending, although there are many Canadian lenders who’ll finance rental properties. Mortgage default insurance was eliminated for certain mortgage types, like those for investment properties.
Consequently, you have to put down at least 20% when you buy a non-owner-occupied rental. In case you live in one of the units, you can put down as little as 5% (5% on the value under $500,000, and 10% on anything above that amount). How many units the building has is also important. Most properties with four units or less are zoned residential, so you’d qualify just like your main house. I can help you figure out if you qualify for a commercial mortgage for multi-unit properties with five units or more because they are generally zoned commercial.
Mortgage Rates for Investment Properties!
Rates for investment properties (which usually require at least 20% down) tend to be a little higher than those for homes with less than 20% down, since the best mortgage rates are generally reserved for those who put less than 20% down or more than 35% down.
Non-owner-occupied rental properties are also typically upcharged at least 10 to 20 bps more since they are associated with greater risks. When borrowing money, borrowers are more likely to prioritize payments on their principal residence over their rental property if they fall into financial trouble.
Fixed or Variable for an Investment Property?
Homebuyers are usually asking this question, but investment property owners should also take it into account.
Mortgage Professionals Canada data shows that the majority of mortgage holders in Canada choose a fixed mortgage rate over variable rates: 72%, or 4.45 million borrowers.
The flexibility that variable rates offer makes them very appealing to investment property owners. When you sell your home or if you wish to pay off your mortgage faster than allowed through an annual prepayment privilege, a variable rate mortgage entails a lower prepayment penalty of just three months’ interest.
We can help!
Many times there is just a little push your application needs to receive a positive result. Of course, no matter how far are you from final approval, if the answer is no, you can be a mile or an inch close, all the same. We pride ourselves our ability to combine bank and private funds in order to accomplish positive results, and we do it fast. MortgagePRO is a licensed Canadian Mortgage Brokerage, our Broker also a lender powered by own investment funds in Private Lender Inc. goes where others are unable.
If we can not do it, most likely nobody else can!