Buying investment property can be a very appealing option for most Canadians. If it’s done right, investing in real estate can benefit you financially in a number of ways. The property’s value can appreciate over your initial purchase price and the investment property can generate a positive income stream in excess of your expenses. Your equity can increase as today’s affordable payments are applied against your mortgage.
Most banks and lending institutions require 20% down payment for an investment property purchase. With 20% down the mortgage is conventional and no mortgage insurance is required.
We can also use from 70 to up to 80% of your projected rental income from the property to help you qualify for the investment mortgage. An appraiser will determine market rents for the property in their report.
Most banks offer slightly higher interest rates for revenue property mortgages compared to the best rates offered for owner-occupied properties but we still have lenders that offer the same discounted rates for both revenue and owner-occupied property mortgages. One of these lenders is a major Canadian bank but they would like to see that you put a minumim of 25% down if you are buying a revenue property.
20% Down Mortgage Example:
- Purchase price of $305,000
- Down payment (20%) – 62,000
- Mortgage of $248,000 @ 3.19%
- Monthly payment – $1,068
- Monthly rent: $1,600
Extended amortization up to 30 years is now available for investment mortgages. This will allow you to keep the payments low and affordable for potential tenants