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(November 29, 2021)

Intro (pre-amble): up to 14:46 mark of podcast (Rental Property Mortgages | Investors flooding market? | Going long on rates | Real Estate & Currency)

Qualifying for a mortgage when purchasing or refinancing a rental property can get very confusing.

Here are the key qualification criteria when qualifying for a Rental Property Mortgage:

the minimum down payment to qualify for a rental property mortgage ranges from 20% to 35% (refinances are limited to 65% of the appraised value)
rental income generated from the property does not necessarily translate into direct qualifying income. 50% to 95% of the rental income is eligible as qualification income (varies radically from lender to lender)
the rental income eligibility is classified as either one of the following (depending on the lender and type of income):
- General Qualification Income (least preferred): the mortgage balance is maintained in the application and becomes part of the overall debt load that needs to be serviced for qualification purposes
- Offset Income (most preferred, best bang for your buck): the mortgage balance is removed from the application and a positive or negative offset figure is added to the overall application depending on the lenders offset calculation
There are (3) types of rental property classifications and their income qualifying parameters are unique and independent of each other:
- Basement Suite rental: when the mortgage holder resides in the property and rents out the basement suite
- Subject Rental Property: the rental property mortgage that the mortgage holder is currently applying for (purchase or refinance), and
- Existing (or Stand Alone) Rental Property: rental properties that the mortgage holder currently owns
- All three of the property classifications can have unique eligibility criteria for qualifying income allowances. For example, a monthly rental income of $2,000 can either boost or weaken an overall application depending on their respective property and rental income eligibility classifications.
All lenders have limitations when it comes to the amount of properties they deem acceptable for a single applicant. For example, one lender may allow for a limit of 3 properties per applicant (the one they currently reside in plus 2 additional rental properties) whereas another lender may allow for up to 14 accumulated properties under ownership.

Mortgage Brokers are a key resource for individuals who purchase rental properties as they have access to multiple lenders with varying qualification guidelines.
Check in for more on rental property mortgages in future posts!