Considerations When Purchasing Rental Property
Purchasing a rental property has become more and more difficult for borrowers with the consistent rule changes from the federal government, mortgage insurers & banks over the last 5 years.
Today, rental properties need a minimum of a 20% down payment. They can do this only if they debt service at very high standards
1. Only using a 50% addback after all expenses
2. Using on average 3% of outstanding balances of secured, unsecured or even unused balances on approved credit in some cases!
This is easy to see how this could easily put even the highest income earners TDS completely out of qualification, causing a decline or added costs to consider.
Most applicants find themselves either having to place down 35% to be able to use more appropriate qualification guidelines or get the mortgage insured at a premium of up to 3.15% of the entire loan amount to use different guidelines such as:
1. An 80% offset
2. A “real” payment on outside debts, or amortized calculated payment.
Most lenders even limit product options to only a fixed rate or increase the interest rate for rental property purchases, in addition to allowing only lending under residential guidelines after you have 4 rentals plus a principal residence.
With the constant change in options, products & guidelines to get transparency, unbiased advice and the power of choice you AMP will guide you through the process of real estate investing so you always have clarity on the best option for you.
Angela Calla, AMP
Dominion Lending Centres-Angela Calla
Host of ” The Mortgage Show” Saturdays @ 7pm on CKNW AM980 Phone : 604-802-3983
Email: acalla@dominionlending.ca