Mortgages for Investment & Rental Property
Conventional financing is available up to 80% of the purchase price or property value. Investment mortgages can be more difficult to purchase than your principal residence. Lenders and insurers have more restrictions and conditions than a principal residence.
As mortgage brokers we have access to lenders who use the 'offset of rental income' rule that is a fairer way of dealing with rental income than the more probative rules used by many lenders. The 'offset of rental income' allows us to use more of the rental income in qualifying for a higher mortgage.
Most lenders will provide a conventional mortgage to 80% Loan to Value. Some lenders charge a higher rate for rental property, but as mortgage brokers we know which lender provides the best rates. There are some additional costs as the lender will usually ask the appraiser to provide a rental schedule to determine the economic rental of the property.
You are usually assessed a higher rate for home insurance as the property is a rental & there is an additional legal cost as the lender will request an assignment of rental income form/clause to be registered with the mortgage.
- Lenders are looking for clients with good net worth and good ability to repay.
- Some lenders require a net worth requirement over the equity you have in your current home before you will qualify
- Most lenders will consider lending on properties as large a fourplex on a residential mortgage. Five units or higher are usually handled by way of a business loan
When considering buying and owning rental properties it is beneficial to meet with your accountant and get information and guidance from this professional. Mortgage brokers have access to more lenders and know which lenders have the best policies to make it possible for you to qualify for the mortgage.