As mentioned last week, until 2007 you really got a lot of strange answers when asking  banks and brokers about investment property mortgages. Since a lot of the bank reps  didn’t deal with a lot of investment property mortgages, you may have received a lot of  different answers to questions like the amount of downpayment needed. You could be  told 25% one day and then a week later, 35%! Today it's much better, although you're  still in somewhat uncharted waters unless you have someone with experience working  with you.



Here's a summary of the investment property mortgage scene. 

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ASIDE: Remember, the products and programs are constantly changing, so to get the  most current information work with an experienced broker or banker. ---------- 

-- 20% Down Payments – Investment Property Mortgages 

If you choose to use a 20% down payment for investment property mortgages the world  is your oyster. Most financial institutions will bend over backwards to get your business.  You are considered very low risk to default on the mortgage. You'll still need a good  credit score and the income necessary to qualify for the mortgage, but overall, you are  in good shape to shop for a mortgage anywhere you please. You should be able to get  the most attractive interest rates available, whether you choose to go with a fixed rate or  a variable rate. You should also be able to negotiate an 'open mortgage' which means  that there is no mortgage penalty (often 3 months worth of interest) if you sell the house  and pay off the mortgage early.


 

If you aren't able to negotiate an open mortgage, then ask if your mortgage is "portable".  If it is, you may be able to move this mortgage into another investment property with no  penalty or reduced penalties. And you should be able to avoid having to purchase  mortgage insurance all together. 


 

Each bank and/or credit union differs on this point but with some minimal effort and  negotiation you should be able to avoid investment properties mortgage insurance.  These are the details that an experienced mortgage broker can help you with.


 

Onto the fun stuff... 


 

-- 10% Down Payments – Investment Property Mortgages 

In 2007, Genworth Financial began insuring investment property mortgages with 10%  down payments. This was huge. Until this was announced you were stuck with 15% as  the lowest down payment you could use. This may have been announced as a great  way to attract more mortgage business from the large Canadian banks. Also, it was  announced at a time when there were rumblings that AIG (a U.S. mortgage insurer) was  going to enter the Canadian market with similar offerings. Competition is good! This is  a great program that finally introduced a way to purchase residential real estate (up to  four units) with a 10% down payment.  


 

There are a few details that your mortgage broker or banker should cover with you. One is that the insurance premium on this program is higher than for mortgages on a  primary place of residence (a mortgage on a home that you live in). Depending on your  tax planning expertise, and, which real estate investment strategy you use, the higher  premium shouldn't be a show-stopper for you. If you want more info on the tax planning  talk to a financial planner or your accountant. Overall, this 10% program is a major step  forward in financing investment property mortgages. Fantastic news for all of us  investors. 


 

Stick around for next week where we discuss your other options! 


 

If you have any questions about investing in real estate, or you are already an investor  and are looking to leverage your current investment(s) to add more properties to your  portfolio, or you are looking to divest yourself of some of your properties, give me a call  at 905-683-7800. I’ll be more than happy to discuss your individual situation and  answer any and all 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

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