Author: Paramjit S. Girn

paramjit s. girn

Mortgage Delivery Guy & team helps Ontario residents with real estate mortgages. Beside preparing the quality content we help you Leverage your Time & Banks Efficiently to Be Mortgage Free Quicker! Connect with Ontario licensed Mortgage Planners via 1-800-808-1613 for professional & effective Mortgage Planning & Credit Repair services


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Rental Property Mortgages- Not Your Regular Home Mortgages


 

 

Rental property mortgages can appeal to those who want to make money and like the idea of investments. They are also of interest to those who already own other properties and want to re-finance or simply acquire more. The bottom line is smart investing.

rental property mortgages

 

Understanding as much as you can about rental property mortgages and how to leverage your hard-earned money will no doubt lead to a generous ROI (return on investment). You want to be sure you will maximize your time, energy and precious dollars! Whether you are looking for your first rental property or trying to remortgage already existing ones, a grasp of the basic principles that influence ROI is just common sense. Regardless of what financial institution or lender you are working with, this is something you want to be smart about.

You’ll be glad to hear that investments of this kind hold great potential for money making. To paint you a picture, let’s say you put 20% down on a rental property. The monthly rent covers all your expenses. Over the years, the property value only increases by about 3% annually. Yet your rate of return will still be approximately 12%! For some this is a lucrative opportunity they simply cannot resist.

What You Should Know About Rental Property Mortgages

Fraud is rampant when it comes to rental property mortgages, and only 4% of Canadians invest in rental properties. These two facts combined have had significant impact on the formation of lending rules in the mortgage industry – especially for rental property mortgages. Whether you are looking for your first property or trying to re-mortgage an existing rental property, you should consider the following:

  • Minimum equity or down payment should be 20%.
  • Knowing your long term investment goals will assist you in asking the right questions. For example, how many properties do you have in mind? And what areas are you considering? Planning ahead with a good team of advisors will help to demonstrate to others your attractiveness as a low risk client.
  • More documents are likely required for the lender and a prepared client is always more appealing as a prospect for any lender
  • Every dollar of your rental property mortgage should generate at least $1.10.
  • Have ready proof that your down payment is not borrowed by ensuring your bank account has had this money for at least three months. Alternatively, if your down payment is coming from the sale of another property you will need to have documentation of agreement of purchase and sale along with a recent mortgage statement, so your lender is confident about how much money is yours.
  • The more properties you acquire the less options you will have in terms of prospective lenders who are willing to work with you
  • No matter what, never hold back information from your mortgage advisor – it can come back to hurt you later by interfering with your mortgage approval. Remember, we are on your side! Full disclosure helps us to help you.

In Real estate Investing Leverage is Everything

Contrary to the general believes the current state of residential real estate is stable. Acquiring a rental property by leveraging banks money via mortgages will provide you with considerable leverage in your investment. This, in turn, will offer a substantial boost on your return on investment. What you are aiming for is to use as little of your capital as possible – doing so will allow you to invest in more properties.

Here are some examples of how the leverage system can work in your favor:

  • Let’s say you purchase at $100K and put 25% as down payment. After a six-year holding period with your rental property mortgage you can sell for $200K, making a handsome profit in the process.
  • You purchase a property at $100K with 100% cash, which is the old way of doing real estate. Yet you can still sell at $200K after six years.

Self Education Is Power

Investing in rental property is a very different ballgame than buying a house to live in. As always, focusing on interest rates alone, even with rental property mortgages, is always a mistake. You want to carefully consider the bigger picture at hand. Self education is critical to securing the most prosperous arrangement unique to your situation.

This is why a No Fee Mortgage Strategy Session is so important. You can learn facts that typically remain hidden from public view, and leverage Mortgage Delivery Guy’s experience in investing in real estate based strictly on the basis of cash flow analysis. We will discuss your short and long term rental property mortgage goals and customize a plan to maximize your ROI.

Whether you are looking for your first rental property or trying to remortgage one of your rental properties, you should consider following information as a guide:

Credit Score

A credit score of more than 720 is good but again, best you hire a mortgage planner to help iron out any inaccuracies that might be in your report. Following are guiding criteria in selecting options for the table below. Select “not sure” if any of the following situations apply to you:

  • You do not have a credit rating because you are new to the country, have been discharged from a proposal or have previously gone bankrupt
  • Your credit score is less than 720
  • You have never used a credit card, preferring to rely on cash
  • You have a history of late payments in the last three years
  • Unpaid bills have been forwarded to collection agencies in the last three years
  • You’ve never checked your rating and simply do not know

If you have any questions whatsoever about your credit score, contact us , we can help!

 

Sufficient Verifiable Income

Your sufficient verifiable income is comprised of your gross income available for payment of all debts as per lender requirements. Income that qualifies cannot be income derived from probationary periods and must accompany proof of employment such as letters, recent pay stubs, notice of assessments or TI Generals.

Keep in mind as well that income requirements differ from product to product. Don’t hesitate to contact us for more information!

On the table below, select “not sure” if any of the following situations apply to you:

  • Much of your income is cash (for example commission or tips)
  • You are in business for yourself (BFS)
  • You are presently on employment insurance, maternity leave or similar
  • Your total income before taxes is less than $50K a year
  • You have no rental income, only vacant properties

If you still have questions about your income status, give us a call!

 

Home Equity/Down Payment

On the table below, select “not sure” if any of the following situations apply to you:

  • Your home equity (for refinance) or Down Payment (For purchase) is less than 20%
  • You use secured or unsecured lines of credit
  • You don’t know what your home equity status is

If you have any questions that can help you determine your home equity status, give us a call!

To quickly assess and position yourself for rental property mortgages – be it first-time or refinancing – select scenarios from the table below that apply to you for your CID profile. It will help you to make an informed decision about the many products available:

 

Credit
Score
Verifiable
Income
Down
Payment
Reality
check
 
Good Good 20% or more I am ready for rental property. Let's meet for a Mortgage Strategy Session. i am ready
Not Sure
Good
Good
Good
Not Sure
Good
20% or more
20% or more
Not Sure

 

My credit is Shot. How to buy a Rental Prperty?
My employer is cheap. Let's Meet & Discuss Rental Property Mortgage Options...
Shot, Fuselage, Can't stop the leakage! Need to Buy a rental Property, let's meet & discuss mortgage solutions.
bad credit mortgages
It is complicated It is complicated It is complicated My situation is very special. Need to discuss it with a Rental Property mortgage expert immediately. special situation

 

Sign up for our No Obligation Mortgage Strategy Session on rental property mortgages today and learn eye-opening facts that will shape a more prosperous future! I have a holistic approach to property investment, and will offer competent guidance on the best course of action in managing your multiple mortgages and maximizing your return on investment.