Investing in a rental property is a great way to increase your income and expand your investment portfolio, but owning an investment property is very different from owning your own home. Your rental property mortgage is no exception to this, and there are a few major differences between getting a mortgage on a principal residence versus a rental property.
Getting a Mortgage on a Rental Property
One of the biggest differences between rental property mortgages and primary home mortgages is the down payment. While on your primary residence, you may only need a down payment of 5-10% percent, rental properties require more. A non-owner occupied property requires at least a 20% down payment in Canada.
Beyond down payment requirements, mortgage qualification is similar to a personal home mortgage, taking into consideration credit score, income, and all the usual qualifications.
Making the Payment
Renting out a property means that you’re the landlord, and you’re responsible for making payments on time. If you can’t find a tenant or your tenants don’t pay their rent on time (or at all), you’ll still have to make your mortgage payment. Mortgages on rental properties often require more responsibility than a mortgage for your own home, and you’ll need to prepare for these responsibilities in advance. This is why a conversation with a reliable mortgage broker is a great way to start the process if you’re thinking about buying a property.
What If You Have a Mortgage On Your Own House?
You have a few financing options when it comes to buying a second property: You can choose to refinance your home by replacing the original mortgage with a new one, or you could get a home equity loan, which acts as an additional loan on your mortgaged property. You could also use a home equity line of credit (HELOC), although you’ll need good credit and at least 20% equity built up in your first property.
Learn More About Rental Property Mortgages
Finding the right mortgage broker is one of the best ways to ensure success when looking for a rental property mortgage. As an experienced mortgage broker, I can help you master your mortgage for better results and more clarity. Contact me today to start the conversation and get some valuable information for your specific situation.