Have you ever tried to get details on residential investment property mortgages? Let me tell you, it’s a real adventure. Your local Canadian investment property mortgage down payment branch usually doesn’t have a clue and ends up scaring you off from doing any residential real estate investing all together. There are some excellent people in bank branches, you just need to find them.
Basically, bank branches aren’t set up to deal with the questions investors have and they work on residential investment property mortgages so infrequently they usually don’t know the details. An experienced mortgage broker will usually serve you better in this area. Some banks don’t deal with mortgage brokers. BMO isn’t using them right now and RBC has their own team of mobile mortgage representatives. I have experience with the Royal Bank ones and they have proven to be very good. One thing to note that when you are dealing with a bank directly you are limited to the mortgage products that they offer and sometimes you won’t even know other, better suited, options are available to you.
If your bank is not offering the program they may not even tell you that this exists elsewhere. So if you are using BMO or RBC directly, or for that matter, if you are using any bank directly for your mortgage, it’s smart to check in with an experienced mortgage broker as well. That way you’ve covered almost all options available to you. We’ll discuss this in more detail in a future article. Know thisthey are constantly changing and there are new mortgages for investment properties coming available almost monthly!
So again, an experienced mortgage broker is likely your best answer. When buying an investment property you are likely looking to put as little down as possible to gain maximum leverage. ASIDE: Now, be aware that when you do this if your property value falls you could have a mortgage amount that is more than the value of your property. You really want to work with a mentor or coach who can offer some experience and guidance. Canada you are using what is referred to as a “high ratio” mortgage.
ASIDE: A property is “usually” classified as ‘residential’ if it has up to four living units. So single family homes up to four plexes. Anything greater is usually classified as a commercial property and the mortgage qualifications are very different. More on this in another article. The largest mortgage insurer in Canada is CMHC, The Canadian Mortgage and Housing Corporation . Genworth Canada is another mortgage insurer and is the largest private sector supplier of mortgage insurance.
Now, here’s where things get interesting. CMHC has dominated the Canadian market for mortgage insurance since I was sucking on a baby bottle. Well, over the last few years Genworth, in what I believe must be an attempt to get more market share, has aggresively been offering fantastic new mortgage insurance programs. One of the best was introduced in 2007. Well the lack of mortgage insurance competition here in Canada has finally attracted some U. And now AIG has entered the market and PMI and one other U.
All the money that CMHC has been making has finally attracted some other players. As mentioned above, until 2007 you really got a lot of strange answers when asking banks and brokers about investment property mortgages. My first experiences, years ago, were down right confusing. I remember sitting in a branch of one of the big banks feeling like I had to pull teeth to get any answers. Today, it’s much better, although you’re still in somewhat uncharted waters unless you have someone with experience working with you. Here’s a summary of the investment property mortgage scene.