Mortgage Investment Property Financing Tips:
Looking for some investment property financing tips? Now that the Canadian housing market has started its recovery from the 2008 crash, prices have been moving up in many markets. You may be wondering if this is the right time for you to make an investment in residential real estate, but the truth is that a gradual but steady appreciation is the more common trend in real estate prices, so if you invest now, even while prices are moving upward, the likelihood of that continued growth is significantly greater than that of a similar growth in the stock or commodities markets. If you have been curious about how you can profit from either purchasing property or leasing it or selling it through the rent-to-own process, HOS Financial has a number of clients who have added real estate to their portfolios in this way – and we can help you as well.
The good news is that interest rates remain at or near historically low levels. The reason why there have been price increases is that available inventory has been declining. As new construction starts resume, though, that problem should fade over the coming months and years. So what had been a bit of a spike in values should smooth out into steadier growth – and you can take advantage of it.
There are a lot of mortgage lenders and brokerages offering access to investment property mortgages. HOS Financial has connected many clients with loans that started them in the real estate investment market in Canada. Here are some tips that have helped our customers get the best deal from their lenders.
Have a significant down payment
If you’re buying a property to live in, you can pay less than 20 percent down and pay private mortgage insurance (PMI) premiums, such as CMHC, on top of your principal and interest. However, mortgage Insurance providers “may” not cover investment properties, so you need to put together a minimum of 20 percent down in order to qualify for many of the Investment Mortgages HOS Financial can connect you with. If you can get up to 25 percent, your interest rate is likely to be even lower. There are some alternative options, such as using private lenders to take out a second mortgage, but that adds to the cost of credit and can eat into your profits. So make sure that you have enough money to put down for the property in which you want to invest.
Make your borrowing profile as strong as possible
Having the right down payment reduces your loan-to-value ratio, which makes your application stronger. There are some other factors that will also influence the quality of your application, though, such as your credit score, the number that will likely have the biggest impact on your investment mortgage application. A lot of lenders set a line at 740 for their best interest rates. If your credit score is at or above 740, then you’re in good shape. If it’s below 740 but still within acceptable parameters, you can pay to buy points and bring your interest rate down, but if it’s too low, you will have to move to a different tier of lenders (and pay more in interest). If you think you can flip the property through Rent To Own fairly quickly, that might not make a huge difference, but it can be smart to wait even as long as a year to get your credit profile improved so that you get as much ROI as possible.
Stay away from the big banks
This is where HOS Financial can really help. Obviously, if your credit score is perfect and you have a 30 percent down payment sitting in an account ready to go, you won’t have problems finding credit anywhere. However, if your down payment is a little short, or if there some other issues in your credit profile, HOS Financial has relationships with an entire network of smaller lenders all over Canada that can help you. They are looking to build their own revenues, and that can lead to a win-win situation for you.
Take Control Of Your Investments Today!
Give HOS Financial a call today, and we will look at your borrower profile and make the best recommendation for your needs. We look forward to talking to you!