This feature where you can buy rental properties as long as your rents from your total portfolio exceed expenses by a certain ratio--does this apply to lease-to-own properties as well (not just straight rentals)? I guess there`s not reason it shouldn`t...?
1.1% rule in Real Estate Investing in Canada
- Thread starter donksky
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When you own a rental under a lease to own program, the 1.1% rule will apply. By confirming the higher rents on the LTO program, it will actually work in your favour, increaing the overall DCR.
Hope that helps.
Hope that helps.
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QUOTE (donksky @ Jan 10 2008, 08:59 PM) This feature where you can buy rental properties as long as your rents from your total portfolio exceed expenses by a certain ratio--does this apply to lease-to-own properties as well (not just straight rentals)? I guess there`s not reason it shouldn`t...?
We have had some push back from lenders who argue that the additional monthly premium should not count towards the DCR. They arugue that if we defaulted and they had to take over the property, they would not necessarily be in a position to continue a lease to own arrangement. Therefore, only market rent would apply toward the DCR.
You need to be careful with this and may have to change lenders if you hit this one. For me, I count on my mortgage broker to have a solid enough relationship with the vendor that they can coax / cajole / nudge the lender into accepting the full payment.
By the same token, you need to also consider the impact on DCR when putting an RRSP second mortgage on the property. For more detail, visit my blog at http://lease2ownbob.blogspot.com/ and read the October 5, 2006 posting. You can also keyword search the blog using "DCR" or hit the "financing" label on the right side of the blog.
We have had some push back from lenders who argue that the additional monthly premium should not count towards the DCR. They arugue that if we defaulted and they had to take over the property, they would not necessarily be in a position to continue a lease to own arrangement. Therefore, only market rent would apply toward the DCR.
You need to be careful with this and may have to change lenders if you hit this one. For me, I count on my mortgage broker to have a solid enough relationship with the vendor that they can coax / cajole / nudge the lender into accepting the full payment.
By the same token, you need to also consider the impact on DCR when putting an RRSP second mortgage on the property. For more detail, visit my blog at http://lease2ownbob.blogspot.com/ and read the October 5, 2006 posting. You can also keyword search the blog using "DCR" or hit the "financing" label on the right side of the blog.
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In the interests of full disclosure, an obligation of the borrower at all times, you should disclose to your Broker the portion of monthly payments that go towards the purchase price. Some lenders may not count that portion as income.
thanks, Rob,
1. What`s the 5-10% down new mortgage program with CMHC..., is it worth it to go this route vs. conventional 20% down in order to be able to buy more properties? i.e., What`s the drawback & how do I determine if it`s worth it?
2. How does one qualify for this low down payment mortgage?
I want to get it right from the start & not regret it if I go conventional 20% down & realize later I should have gone for 5-10% down
1. What`s the 5-10% down new mortgage program with CMHC..., is it worth it to go this route vs. conventional 20% down in order to be able to buy more properties? i.e., What`s the drawback & how do I determine if it`s worth it?
2. How does one qualify for this low down payment mortgage?
I want to get it right from the start & not regret it if I go conventional 20% down & realize later I should have gone for 5-10% down
- Joined
- Oct 16, 2007
- Messages
- 758
Hi Donna,
In regards to the CMHC program, the downside is that you pay an insurance premium of 4.75% at 90% LTV. Plus another .2 for every 5 year of amortization over 25 years. So in many cases, you would be better off trying to raise the 10% addtional through other means. The beacon score requirements are minimum 620, and you can use an 80% rental offset with any properties.
I`ll post you directly on the other part of the post.
In regards to the CMHC program, the downside is that you pay an insurance premium of 4.75% at 90% LTV. Plus another .2 for every 5 year of amortization over 25 years. So in many cases, you would be better off trying to raise the 10% addtional through other means. The beacon score requirements are minimum 620, and you can use an 80% rental offset with any properties.
I`ll post you directly on the other part of the post.