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Rental Properties: How the new mortgage guidelines affect your buying power, by Richard Batke, Mortgage Broker, Penticton and Summerland BC Purchasing Power and Rental Properties - How have the new mortgage lending guidelines in Canada affected you? The Following comparison is using today's mortgage interest rates for all calculations. |
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Example 1: Non Owner Occupied Rental Property |
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Before April 19 Mortgage Lending Changes: |
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For Someone qualified to carry a mortgage payment of $1200/month for a rental property that has $1200/month income: 1. $237 900 purchase price with 5% 2. $313 000 purchase price with 20% |
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| After April 19 Mortgage Lending Changes: |
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1. 5% down payment no longer available - 20% down payment minimum 2. $127 500 purchase price with 20% down for most lenders. 3. $313 000 purchase price for a select few lenders. |
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Summary: CMHC is no longer participating in the non owner occupied rental market. This means that you must have a minimum of 20% down to invest in real estate. It is also more important that ever for you to be aware of the lending policies of the many different mortgage lenders. They can simply tell you that you are not qualified for your purchase because they are one of the vast majority of lenders that no longer allow you to get the maximum benefit from the income of your rental property. |
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Example 2: Owner Occupied Rental Property |
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Principal residence purchase with a self contained rental suite. This is also true for a duplex, triplex and fourplex. |
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Before April 19 Mortgage Lending Changes: For Someone qualified to carry a mortgage payment of $1800/month: |
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1. $395 400 purchase price with 5% down 2. $531 600 purchase price with 5% down 3. $631 250 purchase price with 20% down |
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After April 19 Mortgage Lending Changes: |
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1. $395 400 purchase price with 5% down 2. $421 000 purchase price with 5% down 3. $631 250 purchase price with 20% down |
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Summary: For owner occupied rental properties, your purchasing power has been significantly reduced if you do not have a minimum 20% down payment. This does not negate the benefit you receive by using a rental suite to pay your mortgage down faster! We are evaluating purchasing power only. In this example, there was over $110 000 reduction in your buying power! |
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Overall Summary: The new mortgage lending guidelines are ensuring that those who have equity are the ones who enjoy the maximum leverage from their resources. You need to become one of them, and I can help you get there. Furthermore, different mortgage lenders evaluate loan obligations differently, some allow child tax benefits and UCC as income, some don't. The days of simple mortgage underwriting are gone, so make sure that you have a well trained and experienced mortgage broker in your corner. Whatever you do, do not limit yourself to 1 or 2 banks. In order to be sure that you are getting the best mortgage, you need to have access to many lenders. I have access to more than 80. |
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Now more than ever it is critically important to use the services of a Mortgage Broker who is not only experienced and intimately acquainted with the individual lender's policies but one who has access to the few lenders who will continue to offer the previous rental income model. This is not an extraordinary change, it is returning to similar guidelines we have experienced in the past, though we can still have a minimum down payment of 5%, rather than the old policy of 20% from years gone by. The real estate market will adjust to these changes and |
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2004 Main St. Penticton, BC V2A 5H4 Direct: 250-809-0285 |
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Richard Batke - Mortgage Broker
Richard Batke Mortgage Broker|
* Purchase * Refinance * Renew * Debt Consolidation * Serving the South Okanagan, including: Summerland BC | Penticton BC | Naramata BC | Okanagan Falls BC | Oliver BC |
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