(March 7, 2024)
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Qualifying for a mortgage in Vancouver, renowned as one of the most exorbitant real estate markets globally, presents a daunting challenge for aspiring homeowners. With prices soaring sky-high and stringent lending criteria, many find themselves hitting a wall in their pursuit of a single-family dwelling. However, there exists a game-changing secret often overlooked: leveraging the qualifying income potential of a basement suite, a hidden gem that can significantly boost your mortgage pre-approval amount.
Regardless of whether you intend on leasing out your basement suite or not, it’s important to know that simply having one within your property can significantly increase your eligible mortgage amount. You can use the market rental income it could generate as eligible qualifying income! Over the years, I’ve encountered countless applications where applicants were under-qualified because the market rental income of a basement suite was not accounted for. In some instances, the variance was as high as 20% between a pre-qualified mortgage using basement suite income and one without the extra added rental income boost.
What is it about the basement rental suite that packs such a powerful punch?
Dollar-for-dollar rental to qualifying income ratio:
This means that every dollar you generate in rental income equally translates to one dollar of qualifying income for the mortgage. Just this alone is enough to put many applicants in the black when it comes to mortgage qualification. For example, with a combined annual family income of $240,000, you would qualify for a mortgage of $1.5M, so with a 20% down payment, your purchase price would max out at $1.875M. On the other hand, if your current mortgage provider shortchanged your qualification by not including the rental suite income, you would qualify for a mortgage of approximately $1.3M, reducing your purchasing power to a price of $1.625M… that’s a 15% variance! Be sure to ask your mortgage provider if rental suite income is included in your mortgage pre-qualification; it could be a game-changer.
Determining the qualifying rental income:
This is a moving target and can change significantly from one property to another. From the onset of your mortgage pre-qualification, your mortgage provider may use an arbitrary estimate for monthly rental income, but feel free to do your own research and provide more precise values to your mortgage broker; this will make your mortgage pre-qualification more accurate and reliable. The market rental value will ultimately be confirmed once you have narrowed down a property and are in the financing conditions stage of the offer acceptance process. At this time, the lender will request an appraisal and the market valuation will be included in the appraisal report. Alternatively, if there is a tenant in place at the time of the purchase that you will retain, you will be able to use the existing lease agreement as your qualifying rental income.
Tax Benefits:
Not only will the rental income contribute to your mortgage payment, but it will also create some tax advantages associated with the rental suite. Inquire with an accountant to explore any potential tax benefits associated with renting out a basement suite.
Are you maximizing your preQualification with basement rental income? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko. You can also call Marko on WhatsApp.
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Contact Marko, he’s a Mortgage Broker!
604-800-9593 cell/text | Vancouver (Click Here to schedule a call with Marko!)
403-606-3751 cell only | Calgary (Click Here to schedule a call with Marko!)
Email: gelo.m@mortgagecentre.com
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