Toronto, Ontario (PRWEB) July 15, 2012
In 2006, the amortization period for property mortgages was increased to 35 years. Due to a longer amortization period, the amount of monthly payments became lower and the interest paid on the mortgage became tax deductible. This made Canada a favorable place for local and overseas property investors. However, Flaherty has once again shrunk the amortization period down to 25 years. Things will soon take a different term and housing industry will be greatly affected.
Sensing a huge change on its way, experts from Syndicate Mortgages, Canada’s leading mortgage brokerage, has warned new investors to become more considerate. On this subject, an experienced expert from SMI shared some valuable advice regarding things that must be considered by investment property buyers. The expert shed light on major factors such as maximum number of properties allowed by the lender, rental income, debt ratio, down payment and much more.
According to the expert, while the conditions in the country are favorable for investors, young buyers and overseas investors may find it hard to get well-suited options without the help of mortgage brokers. He said, “There are a lot of things that investors need to learn about Canadian banks and their mortgage terms and offer for investment properties. For instance, most lenders and banks only allow three to four properties. That is why you must check with a professional broker with years of experience.”
Investors must also know what types of down investment property mortgage programs are currently available. Lenders and banks usually conceal the truth and only show the programs they offer. Investment property mortgages are constantly changing and a broker helps investors find the best option available. Putting as little down as possible guarantees better leverage and that is why it is highly desirable for investors.
Explaining the point further, the SMI expert described the consequence of putting less than 20% down on a property turns the mortgage into a high ratio mortgage. For that reason, it is advisable to put down 20% or more. It will not only allow the investor to avoid insurer rules as well as rules that are in effect since 9 July, 2012. “Our amortization cap is back to 25 years now. Yet, if you want to avoid this new role go for more than 20% because it makes you a low-risk borrower,” adds the SMI mortgage expert.
A few years ago, new mortgage insurance programs were introduced which offered an unbelievably low down payment option. This was largely because the lenders and government were equally trying to facilitate market growth by luring more investors. Today, things are different. The new rules are introduced to cool down the market. Therefore, lenders are no longer entertaining a lower down payment on investment property.
Investment property buyers must also assess their ability to service the debt coverage ratio. The requirement of debt ratio changes from lender to lender. Most lending institutions use rental offset for qualifying purpose. In most cases, these institutes use 50% of the rental income and set it against the PIT. The shortfall is included in the debt ratio. Under these rules, many investors are not able to qualify for investment properties.
“These are the things that investment property buyers must consider before making the decision. The new rules will make qualification difficult for most investors. However, tougher situations can be avoided with the help of a qualified and credible broker.”
About Syndicate Mortgages Inc.
Syndicate Mortgages Inc. is one of the leading Canadian mortgage brokerage firms. Founded in 2008 in Ontario, the company specializes in residential, commercial and construction financing across Canada. With years of experience and expertise in the mortgage industry, and access to an array of lending institutions across Canada, Syndicate is known for finding the best mortgage rates for their customers. Syndicate has branch locations across Canada.