Sometimes it is you – or rather your credit – that determines your eligibility for a mortgage and the interest rate you’d be charged. However, a number of factors about the property itself determine whether or not you can get a mortgage for it and the rate you’d be charged. Let’s look at each in detail.
The Type of Property
The lowest interest rates and down payments are reserved for insured high ratio mortgages meaning less than 20% down payment with CMHC insurance or another Canadian Mortgage default insurer. You may need to pay more down payment if your credit is not great to mitigate some risks.
You’re going to need to put down more money or pay a higher interest rate (or both) on second homes or seasonal homes than you would for a home you live in full-time. You cannot qualify for a residential mortgage if buying a working farm not intended to be your home rather you want to keep it as a working farm. Relatively few residential mortgages will extend a primary home mortgage if it is viewed as a rental unless it is a single family home with a legal mortgage helper generally seen in homes with legal suites in the basement. If you want to buy a home with a commercial storefront in front or on the first floor, most mortgage lenders will refuse because it is seen as too great a risk. These are things we need to make sure the lender and if required the insurer are ok with proceeding. This is where Whalen Mortgages comes into help, we research the properties for you upfront if you tell us the one you are interested in to make sure we are not caught with any hidden surprises regarding your mortgage approval.
The Property’s Location
If your property is outside of a major housing market, it may be viewed as a vacation home and need 35% down payment to purchase unless you are prepared to pay default mortgage insurance through CMHC to help mitigate the risks regardless of the loan to value or another option is a private lender with higher down payment and higher interest rates. Lenders may refuse to issue a mortgage for properties in a bad neighborhood, where marketability can be an issue or require a larger down payment.
Lenders may decline to issue a mortgage if they see the property as too great a risk to them, though the property is in good shape. For example, a condo in an older building may require a larger down payment or a more detailed analysis of the condo association’s financial reports before they let you take out a mortgage to buy it. If the lender has already issued a number of mortgages for condos in that building, they may decline in your case because they don’t want to have too much money tied up in that one project. This is where Whalen Mortgages your Fort McMurray Trusted Mortgage Brokers can come into help and find a lender willing to finance the property you love.
The Property’s Use
Commercial properties cannot be bought with a residential mortgage. If you want to buy an investment property, conventional mortgage lenders will not offer you the same great terms they would if you were going to live in the property. Rental properties do hold higher interest rates and are not able to be insured so require you to put 20% down payment.
A rural lot with enough acreage for a large garden or horses probably doesn’t count as a farm, so you could buy it with less the 20% down as a high ratio insured residential mortgage. If the property is a working commercial farm, then you’ll be forced to take out a farm loan.
Vacation homes and second homes require a larger down payment than a primary residence. If you make the second home your primary residence, you may be able to qualify for 5% down payment as the new home will be bought as your new primary residence and your other home may be turned into a rental which we can use a rental offset with a lease or you may decide to sell the home all together.
Talk to Whalen Mortgages your Fort McMurray Trusted Mortgage Broker to understand your options. 780-715-7533! Remember we work for you Not the Banks!!