Investment Property Mortgage

“Are You Looking To Improve Your Monthly Cash Flow?”

You may be surprised to learn that you don’t need to be making 6 figures to own a second property. The core of owning more than one home is developed through the art of market knowledge, determination, and financial planning! Please read below if you’re planning to purchase a second home with the intention to rent.

  1. The minimum required down payment for a rental property is 20% of the purchase price. Like any property, you can access up to 80% of your home’s current equity to fund your down payment towards that rental property. 
  2. Where you can generally use 100% of your rental income on your primary residence, only a portion of the rental income from a secondary property can be used for qualifying purposes. Most lenders will accept 50% of the rental income added to yours, while other lenders will allow upwards of 80% of the rental income while subtracting your expenses. Because of the additional cost, this may impact what you can afford.
  3. While you will secure the markets best rates with less than 20% down or over 35% down on any purchase of 1 million or less, rental properties will usually come with a premium in interest rates. This premium can be anywhere from 0.10% - 0.30% on your standard 5-year fixed insurable mortgage.

But wait, what if you are looking for an investment property but you do not have the full 20% down? In some cases, by purchasing your second home with less than 20% down, you are able to turn your current property into that desired investment property, while making your new purchase your principal residence. You will be limited to 1-4 units per rental property and can extend your amortization period up to 30 years.

While rental income from the property can be used to debt service your mortgage application, it’s important to remember that some lenders will have a minimum liquid net worth requirement outside of the property. Additionally, all rentals will be subject to a capital gains tax on any profits made when the time comes to sell. You will also need to have your down payment ready (whether that is from your savings or your home equity). This includes a minimum credit score of 680 and you will be subject to qualifying guidelines proving you can financially carry both mortgages.

Contact us at Riley Boychuk Mortgages to learn more about how you can secure your next investment property today.

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