Investment Properties - Rentals
Are you looking to purchase an additional property to generate rental income, or convert a portion of your existing home? What are your options when it comes to financing a second home as a dedicated rental, or even an owner occupied rental?
Funds For The Renovation
When looking to perform some renovations to your existing home, there are a few options to obtain funds to complete the project. Refinancing your existing mortgage to pull out some built up equity is a great way of financing a renovation project, and in times when interest rates are low, this can have the additional benefit of lowering your current monthly payment, or allow you to pay off your mortgage faster. A mortgage refinance serves to obtain the required funds at an interest rate better than that of a line of credit, but at times can come at a hefty upfront penalty. If you're unsure if a refinance is the best option for your renovation project, contact me today, and I can take a look at your current mortgage terms to determine what path is right for you.
In cases where the fee to break your current mortgage for a refinance is high, a HELOC may be the best option for you. Although a HELOC and other lines of credit generally come at a slightly higher interest rate, they do offer greater flexibility when it comes to utilizing funds. HELOCs operate as a revolving source of funds and can be taken as a full value lump sum, or can be drawn down as needed. When it comes to repayment, you are able to make the minimum monthly payments, or pay off the entire line of credit as quickly as you like. What’s more, the line of credit can be drawn down again as you need funds for future projects. If you're looking for flexibility, a HELOC is most likely the best option.
Purchasing A Home For Improvement
Purchasing a home with the intent to add a rental suite is well suited for a purchase plus improvements mortgage. Not only can you obtain funds for the rental conversion, the prospective rental income can be used as an addback to borrower income for mortgage loan approval. Generally the addback value can range anywhere from 50%-100% varying by lender. In some cases, lenders may also require an existing lease agreement if the rental income is to be used for mortgage approval.
Further Considerations
Adding a rental suite to your home is a great way to increase your home’s resale value as well as generate a consistent monthly income to support your mortgage costs. Some things to consider before creating an in-home rental suite include approaching your current lender to ensure this is allowed in the terms of your mortgage. Many mortgages originated as owner occupied have clauses that do not allow rental suites to be added, and if this is done without approval from the mortgage holder, you could be considered in default of the mortgage. It is also best to check with the local bylaw office to ensure your renovations are conforming, and check also with your insurance provider as the addition of a rental suite will affect your coverage and premium.
Dedicated Rental Properties
Are you looking to purchase a home that has an existing rental suite, or maybe multiple? When it comes to obtaining financing for a dedicated rental property, you should consider the number of units the property has as this can affect what type of financing is available to you. Throughout Canada, as a general rule, any rental property containing 1-4 units is eligible for a residential mortgage. Any more than this, and a commercial mortgage may be required; this may vary again by lender. Financing requirements for purchase of a dedicated rental may also vary greatly by lender, so it is important to speak with a professional mortgage broker when navigating a rental purchase.
If you are in the market for a new home, rental property, or multiple rental properties, contact Karen Canning, your Langley and Abbotsford area Mortgage Broker. I can look at your financial situation to help you determine your buying power and help you on the way to a safe and affordable investment.