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With the constantly evolving real estate market in Canada there are various routes especially for investors seeking mortgage for investment condos. With the increasing condo construction and leaping to skies not only is the market gaining prominence but also attracting consumers. Although there are many similarities between obtaining a mortgage on an investment condo and your principal residence, there are a few differences that often tend to be overlooked;
Units: When you are deciding to invest in a single condo for investment the procedure is different; however if you decide to invest in more than 4 condos for investment then you will require to seek commercial mortgage. This means not only would you pay more minimum payment but also much higher rates will apply according to the commercial mortgage criteria.
Occupied: Deciding to live in the condo you are planning to invest; apart from the difference in minimum payment is you can also save on the principal residence mortgage, a down payment of anything less than 20% means you’re limited to a 25-year amortization period; more than 20% could help you get a 30-35 year amortization.
Mortgage Insurance Rates: If you decide not to occupy, you must consider how your down payment will affect your CMHC insurance rates. Also irrespective of the down payment you decide to make, you’ll still have to purchase mortgage insurance. The good news is if you decide to work with a lender you may be allowed to pay a small premium approximately 0.25%.
Debt Service Ratios: One other key difference between obtaining a mortgage on an investment condo and your principal residence is the debt ratio calculation used to determine how much you qualify to borrow / can afford to repay. There are three different methods lenders use to employ investment property mortgages: rental offset, rental inclusion and the debt service coverage ratio. Each method is covered in more detail on our site.