Should I Turn My Home into a Rental Property?

 

Should I Turn My Home into a Rental Property?

Good day!! These days a lot of people are seeking options to purchase a 2nd property to move into but would prefer not to give up their current property. The Banks are not making this a very easy process for qualifying with their rules for using rental income and rental property expenses. We have multiple lenders who will make easier for clients to purchase a new home with a more common-sense approach. Below are just a few benefits to turning your home into a rental property. Purchase a new home with as low as 5% down Lower mortgage payments on your existing home will produce a profitable rental in which you can make money each month on it Increased value on 2 properties at the same time Owning a Rental Property is achievable

For this Illustration, the Bank’s are required to use only half of your rental income, so $1,000 and 100% of the expenses, so adding the mortgage, property taxes along with $100 for heat. Our lenders typically allow for an 80% use of rental income which in this case would produce an increase to your income. As you can see, with the Bank’s calculations qualifying amount would only be $465,000 vs. $580,000 with our more creative lenders. Subject to lender/insurer approval. Qualifying rates are subject to change.

Bank of Canada Rate Announcement

Bank of Canada leaves overnight lending rate unchanged

Really no surprises here.  The bank of Canada decided yesterday to leave the overnight lending rate the same. Originally I was going to give you a bunch of statistics but at the end of the day you probably don't want them. If you do go to this link.

http://www.bankofcanada.ca/2016/10/fad-press-release-2016-10-19/ 

Basically, due to the current economic state of our country it has been decided that it would be best for the overnight lending rate to stay the same.  I don't foresee any changes to this rate until at earliest 2017.  With that, it is my opinion that variable rates are a pretty safe bet. It is possible that variable rates could rise due to upcoming rule changes.

Now on to fixed interest rates, recent changes to the rules for Canadian Mortgages are now in effect making it more difficult for people to qualify for the purchase of a home with less than 20% down.  As you may have heard there will be further restrictions that will come in to play in November.  That is important because some of the restrictions that will be imposed on to the lenders are going to increase costs which in turn will be passed on to you.  Fixed interest rates will be on their way up when these rules changes take effect.

As always.. for more information please don't hesitate to contact me.

Save the Date

The Bank of Canada's next meeting date is scheduled for December 7th, 2016.

Buy a House in Calgary Now
Average List Price: $571,504
Active Listings: 15,756
Recently Sold Properties: 1,895
Annual income required:$109,742.59
Based on minimum down payment.  O.A.C.  For Information purposes only.
**To see what you qualify for contact me**

Buy a House in Airdrie Now
Average List Price: $430,211
Active Listings: 249
Recently Sold Properties:
Annual income required:$79,875.29
Based on minimum down payment.  O.A.C.  For Information purposes only.
**To see what you qualify for contact me**

As always, you can keep updated on current interest rates at www.shawnmooney.com/rates


Shawn Mooney |Bayfield Mortgage Professionals Ltd.
Broker of Record
Your Mortgage Broker for Life
Bus. # 403-945-8769 | Mobile # 403-828-1838
Email: mortgages@shawnmooney.com
Website: www.shawnmooney.com

Cash-Back Mortgage FAQ

What are Cash-Back Mortgages?

Cashback mortgages are just that.  They are mortgages in which you are given cash back to pay some debt or do renovations and so on…

Basically it is a mortgage product which allows you to get beyond the maximum loan to values allowed today on both purchases and refinancing.  I wouldn’t suggest using a cash-back mortgage for renovations as we have better products available to help you with that.

For a purchase the minimum down payment you have to come up with is 5%.  So let’s say for example you buy a house worth $400,000, the down payment would be $20,000.  There are a couple of lenders which will allow you to borrow up to all of your down payment back.  So basically you have the ability to borrow back up to $20,000 to pay off debt or do renovations and much more.

For a refinance the maximum loan to value you can go up to is 80%, with this product you have the ability to get all the way up to 85% of your properties value.  So if you refinanced a $400,000 house to $320,000, you would be able to borrow an additional $20,000 with the cash-back.  You can use the money to pay off debt and do renovations and much more.

It is important to know however that in doing so you will be forfeiting today's discounted rates.  Your rate will be higher than it would normally be otherwise.  For example let’s say with 5% down I can get you a 5 year fixed rate of 2.89%.  With the cash-back mortgage with 5% cash-back your rate would be roughly 5.14%, so a lot more expensive.

Also, the money cannot be used for the down payment of your house.  In addition to that if you pay out the mortgage before the end of the term the payout on the cash-back portion could be in full.
I would strongly recommend you get in touch with a mortgage expert (like myself) to help you determine if this product is right for you. 

Shawn Mooney |Bayfield Mortgage Professionals Ltd.

Broker of Record

Your Mortgage Broker for Life

Bus. # 403-945-8769 | Mobile # 403-828-1838

Email: mortgages@shawnmooney.com

Website: www.shawnmooney.com