Types of Financing
How are you funding your next deal?
Are you researching your financing options for your next investment property? There are a few different paths available, read on and see which is right for you and your portfolio. Remember – always consult a professional mortgage broker who has their own investment properties and knows your local market, (not your friend Sarah the mortgage agent who you really, really like and have a great working relationship with… who doesn’t have any investment properties).
Just like the real estate market, financing options are always changing, and understanding your options is paramount in continual success. Because obtaining financing is constantly in flux, you must learn how to ‘play the market’, instead of quitting (aka getting a ‘real job’), or finding excuses when times are tough (aka you find that ‘no one’ will lend to you, the dollar sucks or your systems failed to work). You must learn to learn to adapt to the market, choose the right players on your team, and play by the rules . If you keep an open mind, and ear you will have the ability to choose a great broker, comprehend what your money is worth in today’s market, and understand the strategies and steps to keep moving forward.
Strategic investor tips:
You must qualify for mortgages, and require a down payment.
Only 4% of mortgages are from investors, and 70% of investors default! Lenders are wary of investors..
One bank will lend you 4-5 mortgages, think long term!
ALWAYS make sure your rental income covers expenses.
Take a look at the different types of financing available for your next real estate acquisition.
Owner Occupied – Conventional Mortgage
20% down payment
Very secure for banks. Lenders like you
Owner Occupied – High Ratio Mortgage
Mortgage must be insured by CMHC or Genworth. When the government makes ‘rule changes’, it sometimes has to do with CMHC.
Stating that you’re ‘moving in’, just to get a cheap mortgage and didn’t have the intention to, IS FRAUD!
Investment Property – Conventional
Rental Property (Could be Multi Family)
20% Down Payment
Residential Property – Banks look at YOU, then the property
Multi Family – Lenders main focus on property. Cash flow.. is the property able to carry itself?
Investment Property – High Ratio
Commercial – Conventional
What is CAP Space?
Commercial – High Ratio
You will likely pay a higher interest rate. Which is fine! *Get over the fact you’re not just a residential home owner, you are an investor. There are more things to consider then interest rate. Like being able to get money in the first place! *Think like an investor*
Consider: Chartered Banks, Trust Companies, Credit Unions
Your bank wants to know your DSL (Debt Service Limit..amount that bank wants you to spend on goods) that 40 % of your verifiable income is enough to carry the property. (those of us who are unemployed don’t like to see verifiable income! :-/). They want to know the amount of the mortgage on your principal residence, 3% of outstanding limit on credit cards, property taxes, any secured/ un secure lines of credit, car leases, ANYTHING THAT SHOWS UP ON YOUR CREDIT BUREAU.