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Mortgage lenders typically expect a down payment of at least 20% for a conventional mortgage. One common option is to draw on the equity from your principle residence, so refinance, do an equity take out or use a home equity line of credit for the down payment on a rental property. Some lenders allow up to 80% of monthly rental revenue as 'other income' when qualifying you to purchase the rental; this increase your income thus increasing the amount you can afford to purchase.
The goal is to make money, keep payments down and not have a mortgage that restricts your options. Your mortgage broker can explain all your options based on your longterm plans for the property.
We often see clients getting variable rate mortgages for investment properties. A variable rate mortgage is generally a lower rate so you are paying less interest on the mortgage and increasing your profit. A variable rate isnt predictable though and has the ability to change during the term of your mortgage so there is some risk involved when taking a variable mortgage. A variable rate mortgage generally has a lower penalty if you choose to sell your home or break your mortgage before your term is up.
The amortization depends on your plans for the property. If you want to pay it off quickly, we often see clients choosing a shorter amortization and more frequent payments. If you are looking to lower monthly payments and have no urgency to pay off the property, we can look at lengthening the amortization so you take longer to pay off the mortgage but have low monthly payments in mean time.
Talk to one of our mortgage specialist to discuss the best options for you!