Are you thinking of getting an investment property mortgage? If so, we must tell you at the onset that is entirely different than getting a mortgage for your home or even that for a vacation home. There are a number of variables around the investment property mortgages. Firstly, you would need to consider if you shall be staying on this property or renting it out. In case you are renting it out, then you would be required to apply for a rental property mortgage. On the other hand you may buy a property which you would partly rent out and partly stay in. For such a property you would be required to apply for an owner-occupied mortgage. The decision to live on or rent out or partly live on and partly rent out this property will have a direct correlation with the minimum down payment you would have to make towards the mortgage.
If it is an owner-occupied building which is also rented partly, you would have to make a minimum down payment amounting to 5 per cent. If the owner and the tenant or either of them occupies the basement, the down payment would be at least 10 percent. Alternatively, if you decide to not stay and rent out the property, you would need to make a minimum down payment amounting to 20 per cent. Also, with the increase in the value of property, the minimum down payment required to be made would vary as well.
Qualification criteria for investment property mortgage
The process of application for rental property mortgages is more stringent than regular mortgages for homes. Not only does it require a chunky minimum down payment, unless the owner has plans to live on the property, an additional requirement is a good credit score. One would also need to convince the lender that the property will attract sufficient income from the rent. This can be proved by showing a current lease for existing tenants or providing market rental rates for similar properties in the current times. This is not it, for, you would also need to show you can pay the mortgage from income other than rent in case the tenants leave or fail to pay rent for any reason. All these conditions make it much more difficult for a property owner to get a rental property mortgage.
Before you set out with such a plan, you must also know that not all lenders offer such mortgages. It is mostly the traditional lenders i.e. the banks who offer such mortgages. Some small lenders do offer rental mortgages but they may be hard to come by, and of course if you come across one, be prepared to pay a premium to them to get a rental mortgage. Armed with all this information you will be better prepared about what you are getting into. Choose well.
If you plan to apply for an investment property mortgage and need help in any step along the way, feel free to reach out to LendX Financial in Brampton, Greater Toronto Area.