For homeowners, a real estate investment in rental properties or investment properties is a great strategy to build their net worth, however, there are some important differences between the financing options for investment properties and residential properties.
Investment property mortgage considerations are complicated. Contact John Antle for help reaching your income property goals.
Is there a difference in my Investment Property financing if I live in one of the units?
Yes, the mortgage application and qualification process is simpler if you plan to reside in the same property you are purchasing.
If I purchase a multi-unit building will I be able to finance 100% of the suites?
Yes, if you plan to purchase a property that consists of more than 4 units, you would be required to apply for a commercial mortgage. The process and qualification criteria for a commercial mortgage are much stricter than a residential mortgage. For qualifying purposes, the purchase of a property with under 4 is much easier.
Would the lender consider income from the suites to help me qualify for the mortgage?
Yes, most investment property mortgage lenders will consider a percentage of the rental offset you will earn in future as a landlord in your rental property, but not the total amount of the rental income. Your net operating income will also be calculated.
Are interest rates the same for an Investment Property as a residential mortgage?
If you are purchasing a property with more than 4 units, you need to be approved for a commercial mortgage. This will have a higher interest rate charged and possibly include different terms than a residential mortgage. Under 4 units will generally be similar rates and terms.
If I plan to live in one of the units would that make a difference?
Yes, if one of the suites is going to be owner occupied the approval process will generally be easier. The big difference is that many lenders will require a smaller down payment if you are planning to occupy one of the units as your primary residence.
Do all lenders offer mortgage financing to purchase an Investment Property?
No, unlike conventional mortgage options, not all lenders offer this financing option. Your investment property mortgage broker will assist you in recommending the best lender to approve a mortgage at market mortgage rates, to buy an investment property.
Is it a requirement to have Canada Mortgage and Housing Corporation (CMHC) approval if I wish to purchase an Investment Property?
In some instances CMHC default insurance would be required depending on the amount of down payment you have and if you will occupy the property as your residence.
What is the down payment required if I am purchasing an Investment Property?
There are several things that lenders will consider in determining your down payment. For example: If you are purchasing a property strictly for investment purposes and will not occupy any of the units, most lenders will require a 20% down payment resulting in not needing a mortgage default insurance.
If there are one or two units, and the purchaser will occupy one suite, some lenders will require a 5% minimum down payment. This down payment rises to 10% if the property has three to four units. During this period you can decide on your monthly mortgage payments. Speak to your investment property mortgage broker to determine the current lending regulations based on your situation.
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