Investment Property Mortgages

Looking at an investment property?

Invest in the right mortgage.

Finding the right mortgage fit for an investment property is the difference between a headache and a smile. Whether you intend to purchase a property for rental income or the future resale of the property, or both — you'll need at least a 20% down payment.

At True North Mortgage, our expert brokers can help sort through the issues and find flexible solutions that work. Plus, you'll get the best rate to help save thousands, all with a smile and no cost to you.

What does an investment property mortgage allow?

  • Fixed, variable and adjustable rate mortgages are permitted
  • Competitive rates usually apply, though lenders may charge a small premium
  • Up to 80% Loan-to-Value (LTV) for a 1-4 unit rental property
  • Extended amortizations can be up to 30 years

With the investment property program, you can:

  • Purchase or refinance an investment property up to 80% LTV
  • Benefit from competitive interest rates and NO application fees
  • Appreciate the payment flexibility that comes with an extended amortization
  • Purchase an investment property in a cost-effective manner
  • Enjoy the convenience of one mortgage and one monthly payment

What is a traditional investment property mortgage?

With a traditional mortgage — a minimum 20% down payment — purchasers have more options available to them when buying an investment or rental property. This type of mortgage is referred to by lenders as a conventional mortgage, and that means mortgage default insurance is not required.

What type of mortgage rates does an investment property qualify for?

Many lenders will offer their best rates with a small premium. Our True North Mortgage brokers can check with accredited lenders to get you the best rate for your situation.

What about amortization?

If you have 20% to put down, have good credit and income, you'll likely qualify for a 30 year amortization (depending on the lender), which can help lower your payments.

A note about net worth

The requirement for a minimum net worth varies from one lending institution to another. Most lending institutions do not have a minimum net worth, however some require that you have a minimum $100,000 net worth per rental property.

Don't forget about Debt Coverage Ratio requirements

The requirement for Debt Coverage Ratio (DCR) varies from one lending institution to another. Some institutions will use rental offset for qualifying purposes, while other lending institutions will use a 1.10% debt coverage ratio — arrived at by dividing the net operating income by the debt service.

What does rental offset mean? A lending institution will calculate 50%-70% of the rental income and off-set it against the principle, interest and tax mortgage payments (PIT) you would make on the property. Any rental 'shortfall' of this calculation will be included in the Debt Ratio, and a rental 'surplus' would be added to your net worth.

For example, assume a rental property with a PIT of $1432 and rental income of $2000. Then take 70% of the $2000 income ($1400) and deduct that from the PIT ($1432). The shortfall of $32 is then added to your Debt Ratio.

Have questions, or want to know your best rate? Give us a call, or apply online now.