Rental property mortgage update
It have been a little while since we provided our clients with a rental property mortgage update and since then there have been some significant changes in the lending market. If you are considering buying or refinancing a rental property this is important for you to know as it could:
*Result in you being approved or declined
*Accessing the funds that you need
*Help you minimize your down payment
*Ensure you receive the best rates and terms
The biggest rental property changes and our solutions for you
Rental offset and debt calculations that can make it difficult for your to purchase your first, second, or third rental:
When you and I look at a rental property and we see that the rental income more than pays the liabilities, common sense would seem to show that this property is self sufficient and as such it should not restrict your ability to qualify. Unfortunately, as you may have discovered, many lenders do not always operate in the realm of common sense. Rather the trend has been to take a portion of the property income and add it to your personal income and then take the entire property monthly payments and add them to your liabilities as if they were a credit card or vehicle loan payment. As you can imagine, if you have two rentals both with $1000 per month in liabilities, although your rental income covers them, within this calculation it is as if you have two $1000 per month vehicle payments – needless to say this can have a very detrimental effect on your qualifying ability. Fortunately we have several options for our clients that use more advanced methods of calculating your existing and new property liabilities so that instead of them restricting you, they are in many cases cancelled out of the equation.
Limiting the number of properties a person can own:
Most lenders have changed their guidelines to only allow clients to own either three properties, four doors (one four plex for example), or five properties in total. This has created a significant problem for many Canadians who own multiple rental properties and has resulted in us being able to work with and help many clients. The lending field is fairly narrow but we do have options for clients who have larger, strong portfolios and would like to purchase an additional property. If you are in this situation please feel free to contact us and we would be happy to discuss your options with you.
Increased down payment:
Some lenders have started increasing the down payment required for your rental property purchase from 20% down payment to 25% up to 35% of your purchase price. While it is true that in some client cases an increased down payment is required, with many of our clients due to our larger lender selection and excellent relationships we are often able to achieve a down payment for you of 20%.
Higher rates for rental mortgages:
In the era of information and technology that we are living in I think it is almost silly that lenders think they can try and increase mortgage rates for clients just because they are buying a rental property. However we have started hearing about this from some of our clients. Lets put it this way, with the amount of business that we do with our lenders and how competitive our market is, they do not even try to get away with playing this game. We will always ensure you receive the best mortgage options and rates for your situation.
Rental property mortgage bottom line:
Simply put, we want your business and will work hard on your behalf to earn it. For every lender obstacle above we have developed a solution and we will continue to innovate and think outside the box for your benefit. Please feel free to phone us or send us a quick online inquiry and we would be happy to discuss your needs with you.