Getting funding for an investment property is very similar to getting a mortgage for your primary residence as you need to provide certain financial documentation to show that you can cover the mortgage payments, property taxes and maintenance. In addition, lenders want to ensure that you have the financial resources to cover the mortgage in the event that your tenant cannot pay rent or leaves unexpectedly. It is important to work with a professional mortgage agent who can help you understand the differences between various investment properties and the steps to secure a mortgage.
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There are 3 main types of investment properties:
In this section we will focus primarily on Single Unit residential and multi-unit residential. For more information on Commercial mortgages click here.
When it comes to single-unit investment properties, there are three different types of properties. Single family homes, Condominiums and townhouses and multi-unit residential buildings.
Single family homes typically are constructed on a single lot with no shared walls. They often have a front and back yard and typically have more square footage than a condo or townhouse. The owner is responsible for all the maintenance costs which is important to keep in mind when you are creating your cash flow and budgeting planning documents. These investment properties often attract longer term financially stable renters and typically have a higher resale value as compared to a condo or townhouse.
Having a condo as an investment property is typically a single unit within a larger building or community and often there are shared walls with other units. Condos may include additional amenities such as a pool, gym, club room. One big difference between a condo and a single family home is that condos typically have a condo fees also called maintenance. These are monthly fees in addition to your monthly mortgage payment and they go towards covering property maintenance outside your unit. Condos are usually easier to maintain than a single family unit but tend to increase in value at a slower pace.
A townhouse investment property is usually a hybrid of a single family home and a condo. Many townhouses have multiple-floor layouts and usually share walls with other units and often only have a terrane or patio as opposed to a front and back yard in a single family unit. Townhouses are generally larger than a condo but smaller than a single family home and are ideal for renting out to students who can accommodate less space. They tend to be more affordable but less private than a single-family home. Each townhouse development is different but most have maintenance costs similar to condos to cover outside maintenance etc .
A multi- residential property is typically 2-6 units in one building purchased by one owner. The cost of a multi-residential property is usually significantly higher than a single- unit property and as such it is important that you work with a SafeBRidge mortgage agent to help you set up the proper financing. As an owner, you may live in one of the units and rent the remaining units out or you may rent all the units out. Multi-unit residential properties typically have the best potential to generate positive cash flow and are a good buy and hold option.
It is also important to note that your investment property mortgage financing will be specific to the type of unit you are purchasing. Most lenders have one set of financing criteria for 1-4 units and a different set of criteria for 4+ units. As always it is important to speak with a SafeBridge mortgage agent who can help you determine which lender would be the best fit for your specific investment property.
Newly married, Ashley & Drake wanted to refinance their family home to start buying investment properties. Ashley had a penchant for design and Drake was a full time Software Engineer who loved doing small reno projects so they were a perfect match. Ashley and Drake came to SafeBridge to get financing for their first investment property after they had talked to their bank and didn’t get answers, so they knew it was time to speak with the mortgage professionals at SafeBridget to get a second opinion. They needed to find a lender who would work with their situation while still offering a great mortgage product. After meeting with a SafeBridge mortgage agent they were able to sort out what financing was needed and were able to secure a fantastic mortgage at a terrific interest rate. See the calculation breakdown below.
Ashley & Drake wanted to explore what the refinance mortgage amount would be to offset the rental income.
The potential rental income for their existing condo 150 Peter St. is $2800 – $3000 / month. Let’s use the conservative figure of $2,800.
Using these variables:
Monthly rent: $2,800 / month
Less property tax: $300 / month
Less condo fees: $750 / month
What is the refinance mortgage amount based on interest rate of 2.00% (for illustration purposes only), 30 year amortization, with a payment of $1,750 / month? The mortgage amount is $470,000, less your existing mortgage $310,000, you would have $160,000 available for down payment.
For 89 Price St., we are using these variables:
Rental income: $1950 / month
less property tax: $240 / month
Less condo fees: $513 / month
What is the refinance mortgage amount based on interest rate of 2.00% (for illustration purposes only), 30 year amortization, with a payment of $1,207 / month? The mortgage amount is $325,000, less your existing mortgage $50,000, you would have $275,000 available for down payment.
From the refinance of the 2 properties, you will have $435,000 for down payment and closing costs.
With a gross income of $162,000, how much mortgage can you qualify for, to purchase a new primary residence, and keep the existing rental properties? With your gross income and these variables on the new property:
Property tax: $540 / month
Heating: $125 / month
Car Lease: $513 / month
You would pre-qualify for a mortgage up to $750,000, plus down payment of $400,000, your new purchase price is $1,150,000. As per above, $435,000 was from the refinance, and we set aside $35,000 for closing costs, ie. land transfer tax, legal fees, moving costs, other disbursements.
*** Calculations are for illustration purposes only, please speak with a SafeBridge mortgage agent regarding your exact scenario.
“ Don’t wait to buy real estate, buy real estate and wait” ( T. Harv Eker)
Owning Investment Properties is one of the best ways to build long term and generational wealth. When you do your research and buy in a smart location you have the potential to benefit from the property appreciation over time and continue to access the equity for capital in other investment properties.
At SafeBridge our access to over 63 different lenders sets us apart. With over 20+ years in the mortgage lending space our team of mortgage professionals is qualified to help you find investment property financing that suits your needs.
No two investment properties are alike and we pride ourselves in customized solutions that solve your unique challenges with regards to investment property financing.
When you work with SafeBridge, our team of professionals take the time to understand your situation and come up with the perfect financing solution. It is always in your best interest to work with a company that will not only help you secure financing but also keep in mind your holistic financial goals and make sure they are all in alignment. As a company we help thousands of clients each year find the perfect financing solution to fit their needs. When it comes to investment property mortgages our team of exceptional mortgage brokers will assist you with finding the perfect mortgage and financing terms.
We want to help make your dream of investment property ownership come true! Contact us today to find out how we can help get your investment property financing in order. Whether you are looking to purchase your first investment property or your 10th, our team of experienced mortgage professionals is here to help!Apply Now
No. Each investment property requires its own specific financing solution. Similar to a residential mortgage you will be required to provide key financial documents to get financing. In addition, lenders have different lending criteria for the first 1-4 investment properties versus 4+ . IT is best to speak with SafeBridge agent to see what financing you qualify for.
You can own as many investment properties as you can afford but keep in mind you may want to structure it based upon your overall investment property strategy.
No, typically interest rates for investment properties are slightly higher than the posted rates available on a traditional residential mortgage.
Chris is a Co-Founder and Financial Advisor at SafeBridge Financial Group, the originators of Mortgage Centered Financial Planning, and is passionate about serving his clients and empowering the incredible team to “Be Better. Be Inspiring.” Prior to co-founding SafeBridge, Chris started his career as a Financial Advisor with Sun Life Financial, formerly Clarica Financial Services, and had the privilege of serving many clients financial needs for over a decade.
Over the last 20 years we’ve been successful in attracting over 60 various lenders that our clients can benefit from. SafeBridge has evolved over the years and has become a very successful company…. The education, that comes along with not just the mortgage agent side of things, but also on the insurance and the investments and the financial planning all comes together in one holistic approach.
Dena is a seasoned Mortgage Broker with 24 years experience in the financial industry. She started her career at Canada Trust as a part-time Teller while attending York University. During her 15 years with TD Canada Trust, Dena held various positions of increasing seniority. As a Senior Financial Advisor she gained knowledge in many disciplines in the banking and investment arena.
For several years Andre has worked in the Financial Planning and Mortgage Solutions field with Scotiabank. After experiencing success, and gaining a wide knowledge base in the banking world, he decided to leave the bank to join a Boutique Mortgage Brokerage, Safebridge Financial Group. Andre made the change so that he could offer clients a wider variety of mortgage options and lenders.
At SafeBridge we believe in experiencing growth together. We want to ensure that each of our agents is successful and feels a part of the SafeBridge team. We offer customized training, lender previews, team events and even team trips to build the strong culture of inclusion and support that so many of our agents enjoy.
We believe it is essential to hire and Partner with the right people. We are looking for the best and brightest in the Industry to join our Exclusive Group of Professionals. Our team consists of loyal top producing Agents that have demonstrated exceptional care for their clients and passion for the industry in which they serve. Our Mortgage Centered Financial Planning approach helps our team foster long lasting relationships, which brings a unique process to the mortgage business.
With over 20+ years in the Mortgage Industry, SafeBridge has built a solid reputation in the industry and is well respected by all major lending partners. SafeBridge has partnerships with over 10 insurance providers in Canada and has access to hundreds of mortgage products.