15 May

Why you need a home inspection.

Posted by: Matthew J. Charlton

A home inspection isn’t a legal requirement when you buy a home in Canada. Yet, it’s certainly a wise decision for the largest purchase you will likely ever make.

1. Things unseen

The home you want to buy may have a gorgeous skylight, cathedral ceilings and a huge primary bedroom. But the home’s aesthetics can hide big problems.

When you tour a house, you aren’t climbing into the crawl space or looking at the furnace. A home inspector isn’t wowed by beautiful staging. He or she will look at what’s in your walls, not what’s on them.

2. Realistic budget for home maintenance

Many home inspections include the items that will need to be replaced within the next five years.

Paying for a home inspection can help you come up with a realistic home maintenance budget. If you know that the windows and roof are nearing the end of their lifespan, you can plan for that.

3. A solid negotiation tool

Getting a home inspection gives you a huge amount of leverage. You can ask the sellers to fix some or all of the issues found during the inspection. Or you can renegotiate the sale price or ask the seller to contribute more towards closing costs.

With a home inspection, you have the upper hand in the deal. This gives you a lot of power to get a better deal on the purchase. Of course, you can also choose to back out of the sale if there are big, expensive issues that you’d rather not deal with.

4. Can be an eye-opener

A home inspection will reveal the big picture when you might be focused on the location and the open kitchen plan. You don’t want to be blind to the potentially big issues like foundation cracks or electrical problems that can lurk unseen.

5. Peace of mind

Lastly, and most importantly, a home inspection gives you peace of mind. You’ll be able to finalize the sale of a home knowing exactly what you’re getting yourself into. That way, you don’t uncover any major surprises shortly after moving in—even new builds are subject to issues.

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16 Apr

Industry Jargon Explained.

Mortgage Tips

Posted by: Matthew J. Charlton

Baffled by some of the phrases realtors and bankers throw at you? Here are some commonly used—but not always understood—words to describe mortgages:

Amortization Period

This is the number of years it will take to repay the entire mortgage in full and is determined when you are approved. A longer amortization period will result in lower payments but more interest overall as it will take longer to pay off. The typical amortization range is 15 to 30 years.

Closed Mortgage

This is any mortgage where you have agreed to pay the lender for a specified period of time. This means that you cannot pay it off, refinance or renegotiate before the mortgage term ends without incurring a penalty. Depending on the lender, there may be options for accelerated payments but it depends on your particular mortgage contract. While these mortgages tend to be a lot stricter, they can often provide lower interest rates.

Conventional Mortgage

In the case of a conventional mortgage, the loan covers no more than 80% of the purchase price on the property. This means, the buyer has put 20% (or more) down on the property. These mortgages do not require default insurance due to the amount down.

Default

Failure to pay your mortgage on time will result in defaulting on the loan.

Derogs

Short for ‘derogatory’, derogs refers to an overdue account or late payments on your credit report.

Down

Short for down payment. In Canada, the minimum down payment is 5% on any home purchase.

Fixed

A fixed-rate mortgage means you are locked in at the interest rate agreed for a longer length of time.

Flex Down

This refers to a borrowed down payment program, which allows homeowners to “borrow” money for the down payment from a credit card, line of credit or other loan. In this case, the repayment of the loan is included in the debt calculations.

Foreclosure

This refers to the possession of a mortgaged property by the bank or lender if a borrower fails to keep up their mortgage payments.

High-Ratio Mortgage

A high-ratio mortgage is where the buyer has provided a down payment of less than 20% of the purchase price and needs to pay Canada Mortgage and Housing Corp. (CMHC) to insure the mortgage against default.

MIC

Short for a Mortgage Investment Corporation, this is a group of investors who will lend you the money for a mortgage if a traditional lender will not due to unusual circumstances.

Open Mortgage

An open mortgage means you can pay out the balance at any time, without incurring a penalty.

PIT

Principal, interest and taxes— a calculation representing the amount you can afford to pay monthly on your home. Heating costs are often included in this calculation (PITH).

Pull

Also known as a ‘credit check’ or ‘credit inquiry’ a ‘credit pull’ refers to the act of checking a credit report to determine if the borrower is a viable investment prior to approval of the mortgage.

Term

Term is the length of time that a mortgage agreement exists between you and the lender. Rates and payments vary with the length of the term. The most common term is a 5-year, but they can be anywhere from 1 to 10 years. Generally a longer term will come at a higher rate due to the added security.

Trade Lines

This refers to any credit cards, loans, wireless phone accounts, or mortgages that appear on your credit report.

Underwriting

This refers to the process of determining any risks relating to a particular loan and establishing suitable terms and conditions for that loan.

Variable

A variable-rate refers to an interest rate that is adjusted periodically to reflect market conditions.

20/20

A condition that refers to repaying 20% of the mortgage balance OR increasing your payment by 20%, without incurring a penalty.

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5 Apr

Purchase Plus Home Improvements?

Home Tips

Posted by: Matthew J. Charlton

When it comes to shopping for your perfect home, it can be hard to find the exact one ready to go! In fact, most homes come with flaws of a sort whether it is old paint or flooring, outdated fixtures or perhaps more extensive repairs are needed. While some buyers have no issues dealing with these deficiencies in a home or perhaps do not consider them dealbreakers, other house hunters might.

If you’re thinking of purchasing a home that requires improvements, there is a mortgage product known as Purchase Plus Improvements (PPI). This type of mortgage is available to assist buyers with making simple upgrades, (not major renovations where structural modifications are made). Simple renovations include paint, flooring, windows, hot-water tank, new furnace, kitchen updates, bathroom updates, new roof, basement finishing, and more.

The Purchase Plus Improvements mortgage is a great option if you’re interested in incorporating the costs of your home renovation into your mortgage loan. This option allows you to immediately increase the value of your home, receive money to cover renovation costs at a great interest rate, and complete major upgrades right away.

Here’s how the program works:

The amount allowed for improvements is typically 10–20% of your home’s purchase price, or up to $40,000. The money must be used for “improvements” or “upgrades”, not necessary repairs like leaks or structural issues. It also must be for something that adds value to the home, such as completing a full bathroom and kitchen renovation.
We would need an official quote(s) of all the work that is going to be done upfront, at the time of file submission in order to add the quote(s) to the purchase price to determine the “value” of the home the lender will consider. The down payment is now based on this new higher value. Note: If you have an accepted offer, you may need to request an extension on your Condition of Finance in order for this work to be done.
The mortgage is funded based on the contractual price, but the money allocated for improvements is held at the solicitor’s office until the work is complete.
The renovations and updates can be done by yourself or a company/contractor, but heavy labour cannot be reimbursed. If you do the work yourself, only the cost of materials is released. If a contractor or company does the work, simply provide the invoice and they will be reimbursed directly for the full amount.
An inspection report from an appraiser is required once the project is done so the lender can confirm the completion and acceptable quality of the work done.
If the final costs are less than the initial estimate, the leftover money is applied back against the mortgage. This program is available at competitive rates, both fixed and variable.

The lender will release the full funds directly to the lawyer with instructions to hold onto the portion for improvement costs until the renovations are completed. You would need to pay the contractor(s) and then, once the renovations are complete, and the lender has approved and waived the holdback, the lender will allow the lawyer to release the additional funds.

To get started with this type of mortgage program, the first step is to get in touch with me to understand how this mortgage product would apply to your application and specific situation. Understanding what you qualify for and the types of improvements that can be included in the financing, will help you better understand which potential properties might work great for you and how much financial room you have for the cost of improvements.

Learn more about the Purchase Plus Improvements mortgage here.

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13 Mar

Spring Cleaning Tips!

Home Tips

Posted by: Matthew J. Charlton

Spring is just around the corner!!

While few of us enjoy Spring cleaning, we can all appreciate having a fresh home!

Read on for six Spring cleaning tips to help you tackle your home and get it looking its best for the season ahead:

1. Create a Playlist: Everything is more fun with a great playlist! Not only is music great therapy but it can make the cleaning process go by quicker and make it more enjoyable. Check out my curated Apple Music Playlist and discover new music!

2. One Room at a Time: Everyone likes the aftermath and seeing their home all sparkly and fresh, but sometimes it can be an overwhelming process to get to that point. It is best to clean one room at a time, starting with the smaller ones or those that need the least amount of cleaning and work your way up to the larger, project rooms!

3. Declutter as You Go: Spring cleaning isn’t just about shining up the brass on the door and dusting. It is just as important to declutter your space as you go! Before you start cleaning a room, pinpoint items that can be discarded and go through closets and cupboards for anything that you can donate.

4. Think Green! Spring cleaning is starting the season off on a fresh, clean note. Don’t muddy that up with harsh chemical cleaners. In today’s eco-friendly environment, there are many eco-friendly and safe alternatives to regular cleaners. Vinegar is a great substitute in the bathroom or kitchen as well as combining vinegar, baking soda and water as a deep clean alternative. You can also opt for a steam cleaner to manage tile, hardwood floors, appliances and even outdoor areas as they only use hot water and vapor.

5. Don’t Forget The Fridge & Freezer: The best time to clean out your fridge and freezer is right before you do your grocery shopping, so they will be at their most empty. Dispose of anything that is past its expiration date and any almost-empty items you won’t use. Before you restock be sure to wipe down the interior of the fridge with disinfectant and a damp cloth. The same can be done for the freezer but you’ll have to defrost it first!

6. Clean Air Reduces Allergies: Replacing furnace and HVAC filters is one of the most overlooked parts of Spring cleaning. Going as far as replacing your standard filter with a more robust one with a higher rating will help keep you even healthier (and allergy free!) this year as they catch smaller particles to ensure your home is void of allergens, chemicals and even odors.

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7 Mar

Preparing a Budget & Determining Affordability

Mortgage Tips

Posted by: Matthew J. Charlton

The Importance of Preparing a Budget Before Purchasing a Home.

The homebuying process, especially for first-time homebuyers, can be an exciting time. The idea of purchasing a home conjures up many emotions, dreams, and possibilities. While the homebuying experience is positive for most, it can be daunting for many. The importance of working with qualified professionals (Realtor, Mortgage Advisor, Lawyer) cannot be understated.

As a licensed mortgage pro, I help people like you achieve the dream of homeownership. In my experience, there is one element of the process that I regularly see being overlooked… The importance of preparing a budget and determining the true affordability of home ownership.

Why is it important?

People are generally under the impression that getting approved for a mortgage means they can move forward with the purchase. It’s not so simple. The calculations used by lenders to determine affordability do not include many expenses that most Canadians incur. Preparing a budget will help you factor in all your monthly costs to give you a true sense of affordability.

When should you prepare it? What should your budget tell you?

Prepare a budget before you begin looking for a new home. This will allow you to determine how much of your take-home pay you are spending, where it is being spent (discretionary vs. non-discretionary expenses), and how much you have left at the end of the month. Preparing and analyzing your budget at this point should give you an idea of what kind of mortgage payment you can comfortably afford while maintaining your current lifestyle. It can also give pause for thought… Perhaps you did not realize the effect a mortgage payment might have on your monthly budget. Consider whether you want to take on this added cost, or start restructuring your budget to accommodate for this new expense.

If you are not sure how much your potential mortgage payment might be, get in touch with me and I can take your expenses into account and provide you with your monthly mortgage payment based on today’s rates, which will give you an approximate dollar amount.

If you feel like running some numbers right now, download my free app “My Mortgage Toolbox” on the Apple App Store or Google Play Store. My app guides you through all the expenses and considerations you’ll need to be aware of and generates clear reports for you to download and keep for your reference.

If you have zeroed in on a few properties or are ready to submit an offer, it would also be wise to prepare a budget at this point. If you have already created one, revisit it and add in the numbers based on the property or properties you are considering. You should now be including all the new costs you will be incurring once you’ve purchased your new home, including (but not limited to) your:

Mortgage Payment
Property Taxes
Home Insurance
Estimated amounts for Heating, Hydro & Water
Car Insurance –
- If you are moving to an area where you’ve never lived, you should check to see what impact (if any) it could have on your car insurance premiums. If you have 2 or more vehicles, this is an added expense you will want to factor in.
Cable & Internet –
- If you are a first-time homebuyer, chances are you have not paid for this in the past, making this a new expense.

You should also allocate some money for miscellaneous expenses such as repairs, as there are always unexpected costs that arise when you are a homeowner. Once you’ve factored in every expense, your budget should clearly show if you can afford a new home. It can be a real eye-opener but also a valuable tool that you can use to help plan for your immediate future. Remember, if your budget shows it would be difficult to afford your new home, it doesn’t mean that home ownership is out of reach. It may just require some thoughtful consideration on your part in your other areas of spending.

Who can help you prepare the budget?

A budget is something that you can easily prepare yourself. There are many templates available online. The point of the exercise is to provide you with an accurate breakdown of where your money is being spent, so do yourself a favour and set aside some time to prepare a comprehensive budget.

If you feel that you would be better served if you had some assistance in preparing your budget, possibly because you would not be honest enough with yourself, or you may not think of all the expenses to include, reach out to someone you know and trust. Consider speaking with your Accountant, your Financial Planner, or a trusted member of your family. If nobody comes to mind, I’d be happy to introduce you to professionals who can provide you with the objectivity you need.

Not just for first-time homebuyers…

Preparing a budget is recommended not just for first-time homebuyers — it should be done by anyone purchasing a new home. If you are moving into a larger home, where the mortgage expense and other homeownership costs will increase, it would be prudent to put everything down on paper to see exactly how your total monthly expenditures will change. What can you afford? Will you be able to afford your current lifestyle? Or do you need to reduce your spending in other areas?

Preparing and maintaining a budget is something everyone should do regularly, even if it’s simply to determine where your money is being spent. It can help to identify areas where spending can be curbed and where opportunities to save may exist. Budgeting is an essential part of any Financial Plan and something we should all get in the habit of doing.

Check out my Homebuyers Guide, which outlines the homebuying process, great tips for securing your financing, and references to all the things you need to know! Request a copy of the Homebuyers Guide here!

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4 Mar

Preparing for the Spring Market

Mortgage Tips

Posted by: Matthew J. Charlton

Spring is just around the corner! Some of you might be anxious to buy or sell this season, so let’s take a look at the trends for the upcoming Spring market.

From a seller’s perspective, this is the best time to sell with motivated buyers and a huge demand that may diminish as the Bank of Canada raises interest rates and governments work to increase supply. As always, it is important to ensure that you properly list and market any home you are looking to sell to attract the right buyers.

For buyers, it is likely that Spring is going to be somewhat hectic as most individuals will be anxious to get into their new homes before interest rates rise further. You will want to be as prepared as possible if you are looking to buy this season by keeping a finger on new listings, and being prepared to extend an offer almost immediately after a viewing if you found what you’re looking for so it is not snatched up.

Having your mortgage pre-approved and rate-hold secured during this busy market will become vital as not only will it indicate to the seller that you will not have issues obtaining financing (assuming nothing changes between now and purchase with your job, savings, etc.), but it will also allow you to lock in the interest rate for up to 120 days while you shop. Don’t get caught waiving financing conditions quickly and then have to scramble later!

Another key component to note if you’re looking to buy this year is to consider moving further from your workplace. With supply issues currently within the housing market, it might be hard to find that perfect home nearby. Fortunately, most employers are now allowing remote work a few days a week. If this is something you’re open to, you’ll want to keep an eye out for potential office space in any homes you look at.

If you are looking to purchase a home this Spring, download my app to see what you can afford and don’t hesitate to reach out to me so we can discuss your goals and lock in your rate-hold for the best chance of success!

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11 Feb

Refinancing Your Home

Mortgage Tips

Posted by: Matthew J. Charlton

One of the best parts about life is that it is ever-changing.

This is one of the reasons that mortgages are available on short-term contracts (such as the standard 5-year) so that you can adjust your mortgage over time to best suit your needs. However, in some cases you cannot wait until the term is up.

There are a variety of reasons to refinance your mortgage such as wanting to leverage large increases in property value or get equity out of the home for renovations. In some cases, you may be unable to wait until the term is up due to life events such as divorce, a new relationship, kids going off to college or needing to consolidate debt.

Before you refinance, it is important to understand that if you do this during your term you will be breaking your mortgage agreement and there are penalties that come with that. If possible, it may be best to wait until the end of the mortgage term before refinancing.

If you cannot wait, it is important to understand how your lender is going to calculate the penalty if you break a fixed-rate mortgage. Canada’s big banks calculate mortgage penalties based on the discount you were given from the posted rate at the time that you signed your mortgage agreement. The bank firstly takes their new posted rate for whatever time you have left in your mortgage – if you break a five year contract on year three, this would be two years – and apply the same discount they first gave you. The difference between the two shows them the amount of interest they would lose for the rest of the term based on your current balance. This is what then becomes the penalty for breaking your fixed-year term and, in many cases, can be quite hefty. Other lenders such as credit unions and monolines will use the interest rate differential or a flat three-month interest penalty.

Beyond the penalties, there are a few other points to consider before refinancing:

You can tap into 80 per cent of the value of your home
You cannot qualify for default insurance which can limit your lender choice
You would have to re-qualify under the current rates and rules – including passing the “stress test” again

So what can you do? There is an option to sign a fixed rate for a shorter term, such as three years, or you can also consider a variable rate as the penalties for breaking these mortgages are much lower.

Having a discussion with me about refinancing can provide you access to even greater rates and mortgage plans to best suit your needs and what you are trying to accomplish through your refinancing strategy.

Benefits of refinancing:

Regardless of why you are looking to refinance, it can come with a host of great benefits when done properly!

1. A Lower Interest Rate

Depending on where you are in your mortgage term, you could refinance to get a better rate – especially when leveraging the access I have to rates from over 120 lenders versus traditional banks which only have access to their own rate.

2. Consolidating Your Debt

When it comes to debt, there are many different types from credit cards to lines of credit to school loans to mortgages. However, many types of consumer debt have much higher interest rates than those you would pay on a mortgage. Refinancing can free up cash to help you pay out these high interest debts. While it may increase your mortgage, your overall payments could be far lower and would be a single payment versus multiple sources. Keep in mind, you need at least 20 percent equity in your home to qualify.

3. Modifying Your Mortgage

The beauty of life is that it is ever-changing and sometimes you need to pay off your mortgage faster or change your mortgage type. Maybe you came into some extra money and want to put it towards your mortgage or maybe you are weary of the market and want to lock in at a fixed-rate for security. It is always best to do this when your mortgage term is up. Be sure to get in touch to discuss potential penalties if waiting is not possible.

4. Utilize Your Home Equity

One of the biggest reasons to buy in the first place is to build up equity in your home. Consider your home equity as the difference between your property’s market value and the balance of your mortgage. If you need funds, you can refinance your mortgage to access up to 80% of your home’s appraised value in cash!

If you are considering refinancing your home, or wondering if it is the best option for you, don’t hesitate to reach out!

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7 Feb

What to Look for During a Home Tour

Home Tips

Posted by: Matthew J. Charlton

So! You think you’ve found your dream home, and you can’t wait to check it out in person. Before you go, here are a few things that are important to look out for during a home tour:

Odor: Unusual smells can indicate problems, especially mold or mildew issues.
Plumbing and Electrical: Check water pressure as well as electrical systems to ensure no eroded or exposed wires, properly functioning HVAC, sealed water heater, etc.
Noise: This is one that homebuyers can often overlook, but it is important to consider the noise within the house as well as how loud the street and neighbourhood are before committing to ensure they are suitable for you.
Home Layout: Whether or not the layout and function of the home suits your needs.
Number of Rooms: How many bathrooms and bedrooms does the house have? Is that amount suitable for your needs?
Wall and Flooring Condition: What is the condition of the walls and floors? Defects such as warping, cracks, watermarks, etc., can be indicative of larger issues.
Unpermitted Additions or Updates: On occasion, you might go to view a home that was listed as having 2 bedrooms and 1 bathroom, only to find that it actually has an extra bathroom! As great as this might be for your needs, you’ll want to double-check that the addition was permitted. Unpermitted construction can create major issues when it comes to insurance coverage and potential structural headaches if not done properly.

Remember, things like furniture, decor, wall or floor treatments, and hardware or other fixtures are easily updated and not as important when viewing a home as they can be changed if the rest of the home suits your needs!

In addition to these items to keep an eye out for, there are also a few specific questions you should be asking your Realtor, including: deadline for offers, number of offers that have been made, why the sellers are moving, any concerns they may have, whether or not there is a homeowner association with fees, and how old the home is.

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2 Feb

Preparing to Rent out Your Property

Home Tips

Posted by: Matthew J. Charlton

1. Hire a Real Estate Representative: Realtors can add significant value to the overall leasing process including pricing, advertising, showing, screening, negotiating, and paperwork. The total cost is usually one month’s rent. If you don’t have the time or skills to find a great tenant, I’d be happy to introduce you to a Realtor partner that’s best suited for your specific location.

2. On Your Own: Many Landlords have successfully found tenants on Craigslist and Kijiji, though be prepared to plan, deal with administrative aspects (e.g., paperwork, agreements), and screen a random selection of prospective tenants. Be cautious — there are many sophisticated scams operating online. As with most things in life, if it seems too good to be true, it probably is. Viewit.ca is a great advertising site for Landlords. For a monthly subscription fee, your property will be showcased online to prospective tenants. If you prefer to take on the task yourself, read on and make sure you understand all the requirements to ensure you’re adhering to rules, regulations, and the screening process. Not doing so could be time-consuming and costly in the long run.

Renting out a property in Ontario can be exciting, but the process requires planning and careful thought — whether this is your first rental property or you’re a seasoned landlord. From new laws to offering a standard lease, there are several aspects of being a landlord that you must keep top of mind. Rental property management is a business, which requires professionalism, financial prudence, and the ability to attract and screen potential tenants thoroughly before move-in day. Legal and financial considerations should be at the forefront of your actions.

Here are five steps you can follow to make the property rental experience much easier for yourself:

1. Prepare the Unit

Too many property owners don’t take enough time to prepare the unit for showings with prospective tenants. Make sure your prospects are impressed by what they see at your property! If your property has a yard or any landscaping, take the time to clean things up, mow the grass, pull weeds, and get rid of any branches or debris lying around. Invest in a thorough cleaning inside the unit and make necessary repairs. A simple coat of paint can go a very long way to freshen up a dull and dreary unit. The better your property shows, the greater the likelihood it will attract tenants who will appreciate and respect your investment and their home.

2. Do the Necessary Paperwork

Many property owners dread dealing with the paperwork or neglect it entirely, but it’s a crucial part of the rental process. You need to prepare application forms, lease agreements and additional forms that you might need later, including eviction notices. Since the laws and regulations governing tenant paperwork and documentation vary depending on the location of your rental, you should consult with a professional who is familiar with provincial guidelines.

3. Set Your Rental Price

Choosing the right price for your rental unit requires careful thought, research and consideration. Your rate should be enough to cover all unit expenses and still bring in a reasonable profit — but you don’t want to set sky-high rates that dissuade potential renters. Research rental units in your area similar to the one you’re listing on the market. A Realtor can help you determine what renters are willing to pay for units like yours — you’ll also ensure you’re getting a fair rate for your property rental. Request an introduction!

4. Focus on the Advertisement

The right ad can be the difference between an extended vacancy at your property and a unit that gets an overwhelming response as soon as it hits the market. Perfect your ad content, take high resolution photos, then use a variety of platforms to spread the word. Let your family and friends know about your vacancy, put a sign out in front of the property, list the rental on community bulletin boards, and use multiple property listing websites to ensure that you reach the prospective tenants that you are looking to attract to your property.

5. Meet with Prospective Tenants

Once you’ve received responses from potential tenants, set up a time to meet prospects and give them a tour of the property. If you generate a lot of interest, you can have an open house so that several prospects have the opportunity to tour the space at once. Bring plenty of application forms to the showing so prospects can get started with the process after viewing the unit. If you have the time to do one-on-one showings, try to schedule them on the same day so you don’t have to visit the property multiple times over several days. Confirm appointment times directly with prospects to reduce the number of no-shows. Working with a Real Estate Representative offloads much of this process.

6. Carefully Select Your Tenants

Screening potential tenants is an essential part of the rental process — you need reliable tenants. No matter what kind of impression a tenant makes when you initially meet them, take the necessary steps to thoroughly vet them. Your property management experience and your net return are highly dependent on the quality of tenants you have on your property. However, legal mistakes during the screening process can result in unintended consequences.

First, review the tenant applications that you receive to look for any red flags. Pay attention to a prospect’s rental history and employment background, since these factors will inform whether a tenant is reliable and able to meet rental obligations.

After evaluating the rental application, run a credit check to verify the information a tenant provides on their application. Consider joining the Ontario Landlords Association to access valuable resources and premium credit check services.

Next, reach out to a prospect’s references to find out more about them and whether they will be reliable tenants.

Nobody wants to miss out on potential profits, so it can be tempting to fill your open rental as quickly as possible with the first prospect who applies. Unfortunately, this approach is likely to result in more trouble than it’s worth. By taking the time and effort to find a reliable tenant, you’ll enjoy long-term benefits and avoid the headaches of a problematic renter.

Here are a few helpful tips for attaining the most favourable results:

If a rental applicant is not a good fit, trust your instincts and do not let them rent your space. You can also consult with a residential Real Estate Lawyer to help you navigate the legalities of tenant screening and audit whether your process complies with local rules and regulations. I’d be happy to introduce you to a qualified Real Estate Lawyer.

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1 Feb

Buying a Rental Property

Lifestyle

Posted by: Matthew J. Charlton

You might be surprised to learn that you don’t need to be one of the uber rich or make six figures to have a second property. You just need to have knowledge, determination and financial planning!

If you are purchasing a secondary property with the intention to rent, here are a few extra things to know:

1. The minimum down payment required is 20% of the purchase price, and the funds must come from your own savings; you cannot use a gift from someone else.

2. Only a portion of the rental income can be used for qualifying and determining how much you can afford to borrow. Some lenders will only allow you to use 50% of the income added to yours, while other lenders may allow up to 80% of the rental income while subtracting your expenses. This can have a much higher impact on how much you can afford.

3. Interest rates typically have a premium on them when the mortgage is for a rental property versus a mortgage for a home someone intends on living in. The premium can be anywhere from 0.10% to 0.20% on a regular 5-year fixed rate.

4. If you do eventually want to sell this property, do note that it will be subject to capital gains tax. Your accountant will be able to help you with that aspect if you do decide to sell in the future.

Prior to taking on a secondary property, you will need to have your down payment in order (whether from savings or home equity) based on the minimum requirements, and also have a sufficient credit score to qualify. In addition to the down payment, you will also need to pass the stress-test and prove that you can financially carry your existing mortgage and the new mortgage loan.

If you are looking to purchase a rental property, let’s talk before you start. I would love to help review your financial situation, current mortgage and equity, and help you make a plan. The keys to success are right around the corner with a little bit of expert advice!

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