DOWN PAYMENT

Currently, a minimum of 20% down payment is required on rental properties. Since a 20% down payment is applied, rental properties can qualify for 30-year amortization as it doesn't trigger mortgage insurance.

Can I use equity in my current owner occupied home to purchase a rental property?

Yes, you can! Book an initial chat here so we can look at your specific situation.

Can I use gifted funds for a down payment on a rental property?

In most cases, lenders will not consider a gifted down payment for a rental property. However if you are considering using gifted funds, there may be options available.

Can I borrow from my HELOC to pay the down payment in part or full?

Yes. Lenders will consider all of your liabilities and apply this to your debt servicing ratios.

RENTAL INCOME

Each lender will utilize a certain percentage of the rental income to help offset the cost of the mortgage, property taxes, and additional expenses incurred. Typically this percentage is between 50 - 80% and varies from lender to lender.

For example, a lender who uses a 50% addback on a property that rents for $2,000/m, would allow $12,000/yr (not $24,000/yr) to be added to the qualifying income.

I have plans to use the rental unit for an Air B&B. Can I use the money I will receive from the Air B&B to qualify?

No, lenders will not consider Air B&B, single room rentals, or even short term rentals as qualifying income as it can be inconsistent and unreliable. What is done instead is called a Market Rent Analysis. This is a specific type of report that identifies the hypothetical monthly rental income of the desired unit. This is the figure many lenders will use for qualifying.

The suite within the rental property is unauthorized. How does this affect my financing?

Lender guidelines are regional and property-specific. If there are concerns, it is best to verify with your mortgage broker if this will impact financing, as it will depend on your lender's policy.

ADDITIONAL CONSIDERATIONS

• If the rental property is a new build, GST may be applicable. GST can be wrapped into the mortgage and does not need to be paid up front.
• If the rental property is an existing construction, Property Transfer Tax may be applicable. PTT is paid up front and out of pocket.
• Purchasers should budget an estimated $2,500 for legal fees.
• If you are a First Time Home Buyer, you lose your ability to avoid PTT if you choose to buy a rental property as your first purchase.
• Other considerations include property taxes, homeowner's insurance for rental properties, and utilities.
• Legal or tax discussions or questions should be immediately directed to your respective lawyer/accountant.