Making money off of your investment property.
If you’re looking to invest in a piece of property so that you can diversify (or perhaps even begin) your portfolio, there is no better time than now. The Winnipeg real estate market is ripe for new investors, and Canada’s laws on investment properties make the process simpler than you may think.
Keep in mind that there are two kinds of properties that potential investors will often consider when looking for an investment opportunity, and they each involve a different mortgage process. The first option is for smaller residential properties, which contain between one and four units.
If your property falls under this category, then getting a mortgage for it will be nearly as simple as it would for a house of your own, making for an excellent investment opportunity. If you’re willing to jump through a few more hoops, then you can deal with a commercial mortgage for properties with more than four units.
The downside to commercial mortgages is that the criteria are a lot stricter when determining who gets approved, making it much harder to get one in the first place. You’ll also have to pay a higher interest rate for a commercial loan, so most investors will focus on smaller residential property.
Things to consider with your investment mortgage.
The first thing that you’ll want to account for when looking for an investment property is the amount of money that you can expect to spend for the down payment. The mandatory down payment for your new property will range between 5% and 20%, which is a much larger variance than in a typical residential property.
The most affordable down payment is on a one to two unit property that is also occupied by the owner. If you’re looking at a duplex where you’ll rent out the upper floor, you can expect similar terms to a typical residential mortgage.
If you won’t be occupying a one to two unit residence, then your down payment will jump all the way up to 20%. This is because Canadians are obliged to make a minimum down payment of at least 20% on any investment properties that aren’t occupied by the owner since 2010.
Up next, an investment property that you occupy with three or four units will feature a down payment of 10%, whereas one that you don’t occupy will again require 20%. Finally, if the purchase price of the property is more than 500 000 dollars, the minimum down payment if the owner is living in the property is 5% of the first 500 000 and then 10% of anything over it.
The max amortization period on one of these loans is 25 years for anything below 20%. If you pay a down payment of more than or equal to 20%, then you can qualify for either a 30-year or 35-year period in which your mortgage is amortized. This is not dependent on whether or not the property is occupied by the owner.
As with other mortgages, there are a few things that you’ll need to provide the lender with when looking for one for an investment property. First off, you’ll need the Agreement of Purchase and Sale, then you’ll need proof that you can provide a large enough down payment, and you’ll also have to prove a steady income.
If you have existing renters, you’ll also have to provide proof of them, and you’ll even need zoning documents to prove that your property is residential and not commercial. Apart from that, getting a residential investment property mortgage isn’t much harder than getting one for a normal residential property.
If you have any further questions about mortgages on investment properties, don’t hesitate to contact us, as we can discuss each of your concerns in detail.
Investment Property Mortgage Winnipeg
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