Guide To Investment Property Mortgages - Part One
Have you ever tried to get details on residential investment property mortgages? Let me tell you, it's a real adventure. Your local Canadian bank branch usually doesn't have a clue and ends up scaring you off from doing any residential real estate investing altogether. There are some excellent people in bank branches, you just need to find them. Bank branches aren't set up to deal with the questions investors have, and they work on residential investment property mortgages so infrequently they usually don't know the details. An experienced mortgage broker will usually serve you better in this area.
Canadian Banks & Mortgage Brokers
Some banks don't deal with mortgage brokers. BMO isn't using them right now, and RBC has their own team of mobile mortgage representatives.
One thing to note that when you are dealing with a bank directly, you are limited to the mortgage products that they offer and sometimes you won't even know other, better suited, options are available to you.
So, if you are using BMO or RBC directly, or for that matter, if you are using any bank directly for your mortgage, it's smart to check in with an experienced mortgage broker as well. That way you've covered almost all of the options available to you. I say "almost" because there are private institutions that will lend you money (Xceed Financial) and "hard money" lenders. We'll discuss this in more detail in a future article.
"So, What Should I Know About Investment Property Mortgages?"
Know this...they are constantly changing, and there are new mortgages for investment properties coming available almost monthly! So, again, an experienced mortgage broker is likely your best answer.
Investment Property Mortgages - Some Background for Context
When buying an investment property, you are likely looking to put as little down as possible to gain maximum leverage.
----------
ASIDE: Now, be aware that when you do this if your property value falls you could have a mortgage amount that is more than the value of your property. You really want to work with a mentor or coach who can offer some experience and guidance. ----------
When you put less than 20% down on a residential property in Canada you are using what is referred to as a "high ratio" mortgage.
----------
ASIDE: A property is "usually" classified as 'residential' if it has up to four living units. So single-family homes up to four-plexes. Anything greater is usually classified as a commercial property, and the mortgage qualifications are very different. More on this in another article.
----------
Whenever you put less than a 20% down payment the banks use "mortgage insurers" to insure the mortgage because of the perceived higher risk that you might default on the mortgage payments. The largest mortgage insurer in Canada is CMHC, The Canadian Mortgage and Housing Corporation. Genworth Canada is another mortgage insurer and is the largest private sector supplier of mortgage insurance.
Now, here's where things get interesting.
CMHC has dominated the Canadian market for mortgage insurance for decades. Yet, over the last few years Genworth, in what I believe must be an attempt to get more market share, has aggressively been offering fantastic new mortgage insurance programs.
One of the best was introduced in 2007. It was a 10% down payment mortgage program for investment property mortgages. Before this, you had to put 15%, and some banks would tell you that you needed to put 25% or even 35% down.
Well, the lack of mortgage insurance competition here in Canada has finally attracted some U.S. insurers. And now AIG has entered the market and PMI, and one other U.S. based insurer, have plans to enter into Canada as well. All the money that CMHC has been making has finally attracted some other players. And this leads us to the next point… stay tuned for next week!
If you or anyone you know has any questions about investing in real estate, or you are already a real estate investor and are looking to leverage your current investments to even add even more properties, or you want to divest yourself of some of your properties, give me a call at 905-683-7800 and I’ll be more than happy to discuss your situation and answer any and all of your questions.
Thanks For Reading Today’s BLOG!
Brian Kondo
Sales Representative / Team Leader
The Brian Kondo Real Estate Team
Re/Max Hallmark First Group Realty Ltd.
905-683-7800 office
905-426-7484 direct
brian@briankondo.com
www.BrianKondo.com
www.BrianKondoTeam.com
Homesellers - Find Out What Homes in Your Neighbourhood are Selling For! You can receive a FREE computerized printout of ALL recent Home Sales and Current Listings in your neighbourhood. Click here!
Best Buy Hotlist - You can receive a FREE list of the 10 Best Buys in your
specific price range sent to you at No COST or OBLIGATION.
Click here!
Your Home Sold Guaranteed or I'll Buy It!* No Gimmicks! For a Free Special Report that Details my Guaranteed Sale Program, visit: www.BriansGuaranteedSaleProgram.com.
Remember, your referrals change lives! We donate a portion of our income on every home sale to a great worthy cause like SickKids Hospital. To find out more visit: www.ReferForSickKids.com.
If you or anyone you know is considering making a move in the next little while, give me a call or pass on my number ... 905-683-7800 (Office) or 905-426-7484 (Direct).
#houserentalbusiness #spacerental #realestateinvestment #basicrealestatetips #PropertyInvestment2024