Rental Property Mortgage in Edmonton
A lot of clients come to us looking to get into buying rental properties. A rental property mortgage in Edmonton is very similar to a regular mortgage, however qualification is far different. The major differences are the amount of down payment required and how the debt servicing is calculated. These calculations can also vary quite a bit from lender to lender, so you need to know where to go.
The benefits of owning a rental property are obvious. Your mortgage is paid down, while you realize the property appreciation. It doesn’t always work this way but over time, rental properties have proven to be a safe, smart investment. Not only have investors done well with the property appreciation but there is a steady stream of rental income to the owner once the mortgage is paid off.
Why Doesn’t Everyone Own an Investment Property?
By now you are likely asking why everyone does not own a rental property, they sound great! Well for most buyers the issue is qualifying for a rental property mortgage. The lenders (and insurers) have made it far more difficult over the past number of years. First off, many lenders only allow you to use 50% of the rents added on to your income (but include all the costs that go with the property). Secondly, several years ago, the government mandated that investors must have at least 20% down payment when buying a rental home. These two changes in the market have changed the landscape significantly in terms of who can now buy these investments.
If you have a strong income, and the required 20% down payment, we know just where to take you for the easiest qualification. We have lenders that will offset the rental income making it much easier to qualify. And naturally we have access to all the best mortgage rates!
For 2016, Money Sense listed Edmonton as having the 5th highest increase in rental prices in Canada over the past 5 years. It also listed Edmonton inside their top 10, for best places to buy real estate in 2016. The recent changes in the mortgage rules will also play a large part in driving up rental prices as less buyers are able to get into the market. It’s a very good time to buy an investment property in Edmonton!
What are the Requirements to Qualify for Rental Financing?
Qualifying for investment property financing is similar in some ways to owner occupied mortgages but different as well. First off, you will require 20% down payment for the property. There is no longer insured or high ratio financing available for rentals. The idea of CMHC is to get Canadians into homes, not make them investors. Lenders will usually want to see that you have sufficient liquid assets to cover payments should your property sit empty for any length of time.
The second qualification criteria will be your ability to service the debt. Lenders do not simply take the rent payments as a wash with the mortgage payments. There is a calculation that all lenders use (a percentage of rents), and offset it with the cost of running the property. Some lenders will not allow an offset however, they simply add a percentage of the rents your the applicants income; this does not work well and makes qualification difficult. This is why so many clients qualify with us after being turned down by the bank. Lots of mortgage options is the main reason why having multiple lenders at our disposal is the key to your success.
Contact us today to discuss your options for getting into the rental property market.