When you are buying your first home, the minimum required down payment is only 5 per cent of the purchase price.
However, some individuals mistakenly believe that if they own property already, they cannot purchase another home with just 5 per cent down. This notion is false.
The truth is if you own a home already, and want to, let's say, turn your current home into a rental property, then you still only require just a 5 per cent down payment if you are purchasing a new home that will be considered your primary place of residence.
On the other hand, if you want to purchase property for investment purposes, the minimum down payment required is at least 20 percent of the purchase price.
Keep in mind, when applying for an investment property mortgage, your application must also meet serviceability requirements, which means you must be able to qualify for the mortgage payments using your current income. Fortunately, when it comes to investment properties, we can also use rental income that the property will generate to help you qualify for the financing you need.
Rental income can be determined based on current market rents. It is not necessary for the property to already be tenanted.
Is there any way to purchase a second property without 20 percent down?
Yes, as I mentioned above, if you want to rent out your current property and purchase a new home, you still only need just 5 per cent down.
If this is not the case, there is also another program called "The Second Home Program" that allows you to purchase a "second home" with a minimal down payment of 5 to 10 per cent of the purchase price.
This program is suitable for people buying a cottage property or a home for an immediate family member.
Although the program does allow for a minimal down payment, it's essential to realize that if you are applying for a mortgage under the second home program, you will not be able to use any rental income to service the application like you would for an investment property.
Bruised Credit OR not enough income to qualify OR both?
You can still build your real estate portfolio even if you don't have good credit or enough income to qualify conventionally.
We work with many different alternative mortgage finance companies that can help you put together the right financing that is still super competitive and will ultimately allow you to purchase at the price point you want.
How to access equity.
If you are an existing property owner, you may be wondering how you can access the equity in your home to use as a down payment towards your new purchase. You're in luck. Mortgage financing restructuring is my specialty.
During your appointment with me to determine how you can access equity, we will make a plan to restructure your current mortgage in a way that makes complete sense financially. We can also use this time as an opportunity to clean up any debts through consolidation, which, of course, will help you achieve a greater monthly cash-flow. Additional cash flow can be put towards your mortgage through pre-payments, reducing your mortgage amortization period.
We will determine how you can purchase another property at the lowest costs possible.
For more information, please do not hesitate to contact me at (647) 773-4849.
Sarah A. Colucci
Mortgage Edge, Broker 10680
By: Sarah Colucci
Senior Mortgage Agent, Lic. M14000929