Thursday, September 8, 2016

Buying an investment with less than 20% down

Typically clients need to have 20% or more down on a rental however with these solutions they can (if approved) buy a rental with less then 20% down.  

1.  Flex down / borrowed down mortgage

I have access to a lender, at discounted interest rates and no unusual conditions, that allows a client to borrow their down payment on a one to two unit property if they live in a unit.  (For example, a duplex where they live in one unit and rent the other)  A client can use a credit card, line of credit, personal loan, family loan and so on for the down payment and the lender will lend the rest.  

2.  Owner occupied rental

A client that is living in a unit of a 2-4 unit rental can put down as little as 10%.  This mortgage will be using a mortgage insurer (i.e. CHMC) and therefore a client will have to pay their fee and also meet the mortgage insurer’s guidelines to qualify.  Lenders will typically use only 50% of the rental income from the other units.  Also, many lenders will want to see that there is a vacant unit on closing that the purchase can move into.  

3.  Combing a first and second mortgage

I am able to review with clients a first and second mortgage option totalling up to 90% loan to value and with that, the client would put down 10%.  As one lender is not lending more then 80% of the value of a property, a mortgage insurer (i.e. CMHC) is not involved and therefore a client does not need to be bound to their guidelines and pay their fee.  This also may assist clients in qualifying for a larger price range.  Furthermore, the lender can typically use more then 50% of the rental income.  

Andrew Thake, Mortgage Agent
Ottawa Mortgage Man

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