When it comes to buying property there is simply no substitute for laying down cold hard cash. The problem of course is that unless you’re Bill Gates you’re not going to have a half-million dollars or more rolling around in the bottom of your pants pocket. Because of that most people wishing to purchase an investment property are going to have to explore the financing options available and at RMAI/Loancentral.ca we can help you make sense of what otherwise can seem like a complex process.
Obtaining a Rental Property Mortgage in Toronto
When it comes to securing a rental property mortgage in Toronto you have a number of options. Some of the most popular include:
- Conventional financing – On the surface conventional finance seems to most people like the best way to go. After all it’s “conventional” for a reason. Right? Well, sort of. The main reason it’s become conventional is because in the past there simply weren’t a lot of options. Today there are. That said, financing a rental property this way is still a popular option though it will require a sizeable down payment – sometimes as much as 30% – and you’ll often have to prove that you’ll be able to handle both your primary and rental mortgage yourself if the need arises.
- The Home Equity Loan – A home equity loan is when you borrow against your primary home to finance the rental property purchase. This notion makes some folks a bit uneasy (and it should, to a point) because if they have a problem paying off the home equity loan they could lose their house. While this doesn’t happen often it is nonetheless a risk. The home equity loan is typically amortized over 15 to 20 years and is essentially a kind of mini mortgage.
- Private financing – One of the biggest differences between today and your parents or grandparents day is the proliferation of private lenders. Some private lenders operate alone while others pool their resources and set up what is for all intents and purposes their own private lending institution. Securing private financing for an investment property is not something for the timid or unprepared. Interest rates will be higher and you’ll need to pay the money back quicker than with conventional financing. But if you’re eyeing a property that’s a good investment or you simply need bridge financing until conventional financing becomes available a private lender may be the best way to secure your rental property mortgage in Toronto.
No matter which path you choose to finance your rental property keep in mind you’re going to need a larger down payment and you’re going to pay higher interest rates than you did with the mortgage on your primary residence. Also certain types of property like time-shares may not qualify for some types of financing. Your best bet is to talk to the pros at RMAI/Loancentral.ca . They’ll help you make sense out of the rental property financing landscape, explain all your options in detail and hook you up with the right rental property mortgage for your circumstances.