Ever since the April, 2010 changes to the mortgage insurance regulations, people wanting to purchase and finance mortgage properties are having to put more cash into the deals with the maximum insured mortgage now not to exceed 80% of the fair value of the property. But even greater potential impact is that most A lenders are now only looking at 50% of the rental income for debt repayment versus the 80% they were using in the past.
The main results of these two items is 1) more cash is required to close the deal in the first place if you want a higher leverage mortgage and 2) in order to get 80% of the rental income applied to your mortgage application, you’re going to have to apply to a “B” lender which will increase the rate of interest and reduce the overall profitability of the investment.
That being said, interest rates are still at a very low level so an added 1% to 1.5% in rate is likely not going to kill too many deals.
But the end result overall is that investors may end up holding fewer properties in the short run as we continue to work through the current financial cycle.
Unfortunately, many investors still believe there can be ways around these rules and revised lending standards and continually search the market for something that typically is not there. For mortgage brokers that specialize in rental property mortgages, the approach now is to be up front with the borrowers and layout the challenges right away versus being overly optimistic with securing a better deal that what is available in the market place. This can easily save a week of time shopping the deal around with “A” lenders that will not be able to provide what the client is looking for. By being focused and realistic of what can be done right off the bat, the investor is more likely to get the deal closed on time versus wasting valuable time seeing if there are any market anomalies they may be able to take advantage of.
On the flip side, mortgage brokers who don’t typically work with rental property mortgage requests are more likely to spend a lot of time spinning their wheels trying to get a positive answer from unlikely sources.
If you need a Toronto rental property mortgage, I suggest that you give me a call so I can quickly assess your requirements and provide rental property mortgage options that meet your needs, in the time you have to work with.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel