Depending on the type of mortgage you have (or want), there is a wide variation in the actual rate you pay. With the recent drop in the Bank of Canada (BoC) overnight lending rate, the variable mortgage lending rates have trended down to an average of 2.16% and a 5-year fixed rate mortgage can be had for 2.55%. The Benchmark Qualifying Rate (currently at 4.64%) is the rate that lenders must use when calculating a hypothetical mortgage payment for debt ratio analysis. People who choose a variable mortgage or a term of less than five years must typically prove they can afford this payment to qualify for the mortgage.
Not everyone has perfect credit, so with a lower credit score – only the higher rate mortgage products are available (as lenders assume a higher risk of default). Lenders have also been know to demand higher rates for certain types of properties (such as lease hold, commercial or vacation properties). This brings me to a recent message from Katusha who asked:
Do banks or financing agencies normally apply a premium to mortgage rates for rental properties? Are there those that do, those that don’t? What is the experience of blog readers in this area?
According the RateHub, an investment property that is “non-owner occupied” requires a 20% down payment. Mortgage default insurance is also required, with rates varying from 2.90% for non-owner occupied to 1.25% for owner-occupied for a property with a 20% down payment and 25-year amortization.
Are there any mortgage brokers out there who can provide additional information? Any suggestions for Katusha from successful landlords? 😉
[Note: If you want to receive an email each time a new blog topic is posted to House Hunt Victoria, click the Following House Hunt Victoria label at the upper left of this Web page.]