Purchasing an investment property today is a prospect that appeals to both homeowners and non-homeowners alike for a number of very good reasons. Chief among those reasons are that interest rates continue to be low (should you have good credit) and surplus inventories are working to keep prices down (at least for the time being). But if there’s a stumbling block it’s finding a loan for an investment property in Toronto. That’s because one of the effects of the financial crisis was to spur governments worldwide to enact tighter regulations on lenders in order to quell rampant speculative behaviour. To a certain extent it worked. However, it also had the effect of erecting barriers and making it more difficult for newcomers to secure financing.
Securing a Loan for Investment Property in Toronto
In spite of the fact that traditional lending institutions have been reigned in somewhat by new regulations financing is still available to qualified individuals for all manner of real estate purchases, including investment property in Toronto. Some of the most popular forms of investment property financing are:
- Traditional bank loans – While we just made a point to say that banks are being tighter with their cash these days that doesn’t mean they aren’t lending. Just that they’re being more selective. If you have good credit, a steady income and low personal debt there’s a good chance you’ll be able to secure investment property financing from even the most staid old-money bank. The catch? You may have to shell out 30% for a down payment.
- The home equity loan – In the absence of extenuating circumstances it’s typically possible to borrow up to 80% of your home equity to put toward the purchase of an investment property. There are different types of home equity loans including “cash out” financing wherein you secure a new mortgage that’s bigger than what you still owe on your existing mortgage. You then pay off the existing mortgage with funds from the new loan and put the extra toward your new property.
- Private financing – For those who have been rebuffed by conventional lending institutions there is still hope in the form of private mortgage lenders. These are individuals and groups of individuals who work with licensed mortgage brokers to lend their personal money to those who need it. Typically the private mortgage is a short term note that will need to be repaid in a year or two and comes with a higher interest rate than standard mortgages. Private financing of this type is often used by those seeking to profit by flipping an investment property rather than renting it.
The Bottom Line
The key to securing the right loan for your investment property in Toronto is working with a lending agency that has access to an array of public and private lenders offering the widest variety of mortgage products. In the GTA that agency is RMAI/Loancentral.ca . Give us a call today and find out how we can help make your dreams of investment property ownership come true.