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Mortgage for investment property
June 24, 2016
6:49 am
Savings
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Just bought a new condo for investment purposes, that will not be ready until January 2020. In the future, when I have to shop around for mortgages, will the fact that it is for a property that is not my principal residence make it harder to get one or a get a good rate? Any inputs/comments? Thanks!

June 24, 2016
8:07 am
Norman1
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Mortgage insurance requirements will be different for a non owner-occupied property.

CMHC requires at least 20% down payment for a non owner-occupied property. That's in contrast to 5% for an owner-occupied one.

June 24, 2016
3:30 pm
Loonie
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and by 2020, rules may have gotten tighter, as there is a lot of concern out there about inflated housing prices, speculators, non-resident owners, etc.

June 25, 2016
12:53 pm
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If I have 20% percent down payment, would I still be able to get as good of a rate as someone that is getting a mortgage for a owner-occupied property.....Iin general, rates higher for a non-owner occupied property?

Also, is it a must that I tell lenders that I'm looking for a mortgage for a property that I am not going to live in?

June 25, 2016
3:25 pm
Norman1
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Yes, one must disclose that the mortgage is for a property that is not owner-occupied. That is material as the mortgage is no longer a residential mortgage.

The rate will depend on how risky the borrower and the mortgage are.

If the borrower's principal residence is paid off and the borrower is putting 80% down on the second property, then the commercial mortgage rate offered will likely be very good.

On the other hand, if the borrower's principal residence is 95% mortgaged, second property is going to be 80% mortgaged, borrower's financial ratios are near the limits, then CMHC may decline to insure and bank may refuse the loan.

Some unfortunate condo unit purchasers in the Trump Towers in Toronto found out, after purchasing their units, that the banks were not willing to lend unless they put at least 50% down.

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