Buying an investment property has a lot of benefits. It allows you to buy a property in an area that you would consider your second home. If the house is not in use, you can have it rented for a return of investment. In fact, if you keep renting it out, the house pretty much pays for itself. This can also serve as your second income source.
In Calgary where properties are sought after and people from all over the world flock to tour the city and its sights, investment properties sell pretty fast. It would be a great idea to purchase one as an extra source of income.
Investment property mortgages are slightly different from residential property mortgages. Here are a couple of things you need to know when dealing with investment property mortgages:
1. If you are not going to occupy the property, the Canadian government has stipulated that you will need to shell out at least 20% of down payment on the property.
2. If the property or building has 1 to 4 units, it is considered a residential property. The financing criteria and qualifications are roughly the same with your regular mortgage but may have its own sets of difficulties.
3. Owner-occupied investment properties have down payments as low as 5% with a 95% max loan-to-value figure. The percentage of the down payment increases at 10% if the property has 3-4 units but the percentage is the same at 20% if it is not owner-occupied.
4. A change in mortgages carried out last February 15, 2016 stated that properties with more than $500,000 value would require 5% down payment if it is owner-occupied with an additional 10% for value exceeding $500,000.
5. Not all small-scale lenders will offer investment property mortgages, even though you are qualified for one. Some would require you to occupy the property or one of the units if you plan on getting mortgages from smaller banks or mortgage lenders.
6. If you do find a lender who can offer you mortgage on non-owner-occupied investment properties, you might be charged with a premium on top of the mortgage rate.
7. Making down payments of 20% or more makes you eligible for an amortization period of up to 30 years. But keep in mind that your lender might add a small percentage of amount to your premium. When putting a down payment of more than 20% of the home’s value, you should first ask your lender if they will charge you additional premium so you won’t be shocked when your first bill arrives.
8. There is now an investment property program that will allow you to gain access on good mortgage interest rates and sidestep the usual fees needed for mortgage application. This means less expenses and less hassle.
9. Depending on the lending company, there may be a minimum net worth requirement prior to being approved for an investment property mortgage. Some would require at least $100,000 net worth on each investment property before you can be approved. Not all will require this though so it’s a good idea to ask this when looking for a financer.
Should You Go Directly to Your Bank or Hire a Mortgage Broker?
This is the question property buyers often ask. The answer would depend on how convenient you would want your transactions to be. If you are after convenience and you want to save yourself a lot of trouble, hiring mortgage brokers is the best way to go. If you are prepared to do some legwork, going directly to a bank and dealing with all their bureaucracies probably won’t put you off.
When it comes to buying investment properties and getting pre-approval or approval for mortgage of these properties, it might actually be a better idea to find a mortgage broker to help you out. Mortgage brokers have the knowledge and experience in dealing with lenders and their investment property mortgage policies, which can be confusing and varying depending on the lender.
Besides, the convenience that a mortgage broker can offer you during the times when you are shopping around for an investment property just cannot be equaled. There is no need to go through different procedures to acquire mortgage loans or be approved by lenders. They will do it all for you. You are also benefiting from the expertise of these brokers when it comes to finding mortgage rates that will work for your needs. This lessens mistakes and risks.
You don’t pay the mortgage broker, contrary to what many people think. Brokers actually get their salaries from the mortgage lender.
Find a Calgary mortgage broker like us to solve your investment property mortgage needs now. With a middle man doing all the work for you, you should be able to find a lender with terms that will suit your financial capabilities and your current needs without running yourself ragged.