Buying an investment property is a popular option for Canadians looking at different ways to invest their money. If you want to generate regular rental income or invest in a longer-term real estate opportunity, we can help you purchase an investment property.
However, unlike the mortgage you took out on your principal residence, financing an investment property is a little more complex. Most buildings with 1-4 units are zoned residential, so the qualification criteria and financing options from lenders are only slightly more difficult. However, buildings with 5 or more units are zoned commercial, so a lender would require that you take out a commercial mortgage on it. With a commercial mortgage, the qualification criteria is even tougher to meet and interest rates are often much higher.
If you plan and choose your property well enough, you could possibly obtain a property that generates a rental income that pays for itself, covering your mortgage repayment and generate some extra income while you gain equity. Today, this is much harder to do in a hot real estate market like Toronto. If your investment property is cash flow positive, you can use the extra cash and increase your mortgage payments or repay a lump sum to pay off your mortgage quicker. The quicker you pay off your investment property mortgage the more money you save on accumulating interest, making for a smarter investment.
How to Qualify for an Investment Property Mortgage
You must have a good credit history, sufficient rental income (ie: existing tenancy documentation), and have enough non-rental income to meet the obligations of the mortgage.