Back to Blog
16 Oct

Most common roadblocks for investment property mortgages, part 2


Posted by: Aneta Zimnicki

In my previous blog , I discussed part one of the most common roadblocks for investment property mortgages.  In no particular order, the following is the second of my series of the 16 most common roadblocks for investment property mortgages.  The list is based on current lenders’ policies (in general, ‘A lenders‘), and, of course, like all policies, they are always subject to change.

Hopefully we will see in the future some changes in the policies in favour of the real estate investor.  This list is more applicable to individuals who don’t have hundreds of properties and who are applying for residential mortgages (5plex or less).

5. You have exceeded the number of existing rentals you own in total or with that specific lender.  A common number these days is 5 properties, at that point you go hit another lender.  Best to exhaust these lenders first.  Another variation of that rule is total value of mortgages with that lender, usually somewhere in the $1M to $2M range.  Investment property mortgages are like a chess game, planning several moves ahead matters.

6. If you own a certain amount of properties, you need to prove a certain amount of net worth.  Some lenders want to exclude real estate as part of the net worth, kind of a catch22 when the core of your wealth investment is in real estate!  Silly, why would one have piles of cash or liquid assets sitting around making poor returns?

7. The way the lender accounts for rental income, either for the subject property and/or existing property, is not favourable to your overall debt ratio.  So you can have decent rental income cashflow in actuality, but it is eroded by the lender’s rental income calculations, which means as you continue to acquire more property, your debt ratio gets further eroded.  This is one reason why one should consider keeping a decent income from a job or source outside of just rents.

8. Some lenders feel rental property is riskier, so they ask for higher downpaymentrequirement, maybe 25% or 30%.  Most investors want to leverage their money more, therefore  this requirement does not fit their plans.

Stay tuned for part 3 of the list, in my next blog…..

A mortgage broker specializing in investment mortgage is familiar with these (ever-changing)  policies and can help you navigate through these roadblocks with proper mortgage planning.  Trying to figure all this out yourself can be overwhelming, instead use the time and energy to work on being the superstar real estate investor, finding and evaluating properties and attracting joint venture partners.