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How Does a Mortgage for Investment Property Work?

Investment Property Mortgage

Investing in income property can be a great decision and can provide you with extra income
for years to come. But owning an income property is much different than owning your own
primary residence; and getting a mortgage for rental property is much different than getting a
conventional mortgage on your own home, too.

You’ll need to determine first if you’re actually dealing with an income property, an owner-
occupied property, or a second home. A second home is much different than any kind of income
property because its main intended purpose is to be enjoyed and lived in by the mortgage
holder and their family. If you’re actually applying for a second home and not a mortgage for
investment property, you need to be very clear in saying so to your lender because you will
need an entirely different mortgage.

If you are going to need a mortgage on rental property, you then need to determine if you’re
going to live in the home with the tenants or if you’ll have your own home. If you’re the owner
of a single-family home that you rent out, it’s likely that you’ll live in a separate house, in which
you would need to apply for a standard rental property mortgage in Canada. However, if you’re
going to own a duplex or triplex, and live within one of the units, you’ll need to apply for an
owner-occupied mortgage, which is slightly different.

If you’re not going to be living in a portion of the residence and just need a mortgage for rental
property, you’ll need to have a down payment of at least 20%, even if you plan on getting the
mortgage insured through CMHC. However, if you’re going to live in a portion of the residence
along with the tenants, you may be able to be approved for an owner-occupied mortgage with a
down payment of only 5% – 10%. This will vary and as CMHC continues to reduce the amount
of insurance it gives out, each borrower’s situation will be carefully scrutinized before insurance
is approved.

Owning an income property can be a very prosperous and exciting thing; but applying for the
mortgage for rental property can be a tedious and arduous chore. When you’re ready to boost
your income and improve your real estate portfolio, contact a mortgage broker who can help you
through the process, and really make sense of it all.

For more information on Investment property Mortgage Contact CMI Mortgage Broker Today!