Stricter Mortgage Rules on Rental Properties

Stricter Mortgage Rules on Rental Properties

Are you thinking about buying a rental property? Canadians may be facing stricter mortgage rules geared towards investment properties. Learn how these proposed rules could affect your real estate investing goals.

There are two particular restriction proposals on the Department of Finance’s radar, especially as Canada’s big banks are backing the cause. 

  • A minimum down payment of 35% (up from the current 20% for non-owner occupied properties)
  • Banning the use of a Home Equity Line of Credit (HELOC) as a down payment source, in addition to borrowed or gifted funds, on an investment property

Investment properties require a much higher financial stability level than primary homes. The biggest concern is essentially 100% financing. If you use your HELOC for your down payment on a rental property, and then you get a mortgage on your rental property, you do not have any out-of-pocket money involved. 

Mortgage Professionals Canada (MPC) President and CEO Paul Taylor isn’t so sure about the government’s enthusiasm to aggressively target real estate investors. He believes the feds will likely continue to target foreign ownership, rather than domestic investors.

“They don’t really want to see an erosion of property values. They don’t want to target the community of people who are using their homes as a retirement fund. I think you’ll see them more sticking to the foreign buyers’ taxes, and those types of things. I can’t see a down payment change, really.”

If the Department of Finance changes borrowing criteria on investment properties, it could affect some Canadians’ future plans. 

As housing prices continue to rise, finding funds to make a big down payment to buy a rental property is becoming more difficult. Buying a rental property can be a great way to invest long-term and generate monthly income. Get pre-approved today, so you don’t miss out on an investment opportunity. 

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