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Wednesday, July 27th, 2016

The Rules have Changed for Vancouver Revenue Property

Adil Virani Vancouver Mortgage BrokerThe Rules have Changed for Vancouver Revenue Property

It wasn’t so long ago that you could buy a rental unit with virtually no money down and low interest rates to be used as revenue property in Vancouver.

Times have changes drastically when it comes to buying revenue property in today’s mortgage market. Now, if were thinking in investing in anything from a single to a four unit rental property you will need at least to provide up to 1/5 of the market value as a down payment and may still not get the best mortgage rate.

Today’s lenders are also taking a hard and careful look at anyone who is seeking to buy a revenue property. It’s not as easy as it once was to qualify for a rental property mortgage anymore.

If you’re still interested than here are few things you should prepare and expect when you apply.

A Higher Down Payment will be Required

You will need a minimum of 20% down payment on a home and as much as 25% as a down payment if you’re thinking of buying a condo unit.

Choose your Lender Carefully

Here, you need to know that ‘total debt ratio’ (Total monthly expenses divided by total monthly income) must be within what the lender will require. Although you might think that your projected income from the rental unit will be 100% accounted by the lender then think again because they will likely only consider 50% of what you project.

This is a significant difference and can make it even more challenging for you to qualify for a mortgage.

Remember that the debt ratio limits can vary from lender to lender, so make sure you do some research so you can qualify. You need to pick your lender carefully.

Different Tactics Required for Multiple Rental Properties

Many lenders have become less tolerant or more restrictive if you are trying for more than one rental property. At the very least, they may be inclined to charge you a higher rate or terms that are less favourable.

The best advice suggested by the experts is that if you are going for more than one revenue property is that you should consider using a broker that has a number of clients that has multiple rental properties because they are most likely to know the best lenders for this niche.

Think Higher Rates

Like it or not lenders consider revenue properties as a much higher risk. Be prepared to spend more on your mortgage and try to focus on finding lenders that:

  • Has income rental rules which are very flexible
  • Permits a higher debt ratio
  • Allows you to obtain liability protection through using a company name
  • Provides amortizations from up to 30 or 35 years
  • Will let you use market rent appraisals
  • Requires a lower credit score
  • Allows to use money which you borrow or is considered as a gift towards the down payment
  • Permits you to add a vendor take-back mortgage
  • Covers the switching

The big key thing to remember is to select your mortgage broker carefully and one that preferably specializes in rental financing for revenue property. The best question to put to a prospective broker is to ask them how many properties they may have financed in the past year. If the answer is less than 15 than you might be best advised to check out other brokers.

 

 

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