Rental Property Mortgages
Increase your net worth and plan for retirement.
- Fixed, variable, and adjustable rate mortgages are permitted
- Very good rates
- Up to 80% loan-to-value available for a 1-4 unit Rental Property
- Extended amortizations: up to 30 years
The Investment Property Program allows borrowers to:
- Purchase or refinance an investment property up to 80% loan-to-value
- Benefit from competitive interest rates and NO application fees
- Enjoy the payment flexibility that comes with an extended amortization
- Purchase an investment property in a cost-effective manner
- Enjoy the convenience of one mortgage and one monthly payment
Traditional 20% Down Payment Investment Property Mortgages
Since April 2010, Canadians are required to have at least a 20% down payment on a rental property purchase. A 20% down payment allows purchasers to consider many options when buying investment/rental property, and with 20% down, the mortgage is considered conventional and no mortgage insurance is required.
Expect mortgage rates to be higher than owner-occupied properties.
Best Rental Product
Generally, if you have 20% for a down payment, have good credit and income, you will qualify for a 30-year amortization. Some lenders may require more downpayment.
The requirement for a minimum net worth varies from one lending institution to another. Most lending institutions do not have a minimum net worth, however some require that you have a minimum $100,000 net worth per rental property.
Debt Coverage Ratio
The requirement for debt coverage ratio varies from one lending institution to another. Some institutions will use rental offset for qualifying purposes, while other lending institutions will use 1.10% debt coverage ratio.
Rental offset is when a lending institution uses 50-80% of the rental income and offsets it against the principal, interest, and taxes (P.I.T). Only the shortfall will be included in the debt ratio. If there is a rental surplus this will be added to the client’s income.
Assume a rental property with P.I.T. of $1432 and rental income of $2000, we will take up to 80% of the $2000 income ($1600) and deduct that from P.I.T. ($1432). We will have a rental surplus of $168.00 that we can add to income.
1.10% debt coverage ratio is arrived at by dividing the net operating income by the debt service.
We will sit down with you, discuss your goals, and come up with solutions that meet your needs. Before you make an offer to purchase, you will have the knowledge to pick the right property with clear expectations on financing requirements.
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