less than 20% down payment for investment property
- Thread starter Ychx
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In Ontario it is generally 1 year you must reside in the property however if at time of mortgage application you are intending to move out and rent it could still be considered mortgage fraud.
The key is intent. As you are attempting to circumvent mortgage regulations to avoid having to pay 20% down on a investment property it is fraud.
It is regularly done but possibly not by any investors on this forum.
The question is degree of risk and penalty if caught.
The key is intent. As you are attempting to circumvent mortgage regulations to avoid having to pay 20% down on a investment property it is fraud.
It is regularly done but possibly not by any investors on this forum.
The question is degree of risk and penalty if caught.
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[quote user=invst4profit]In Ontario it is generally 1 year you must reside in the property however if at time of mortgage application you are intending to move out and rent it could still be considered mortgage fraud.
The key is intent. As you are attempting to circumvent mortgage regulations to avoid having to pay 20% down on a investment property it is fraud.
It is regularly done but possibly not by any investors on this forum.
The question is degree of risk and penalty if caught.
I think there are two groups. Those who have never done that, like myself, and those who have done so and are smart enough not to talk about it in a way that leaves a permanent, public record like an internet forum.
Michael
The key is intent. As you are attempting to circumvent mortgage regulations to avoid having to pay 20% down on a investment property it is fraud.
It is regularly done but possibly not by any investors on this forum.
The question is degree of risk and penalty if caught.
I think there are two groups. Those who have never done that, like myself, and those who have done so and are smart enough not to talk about it in a way that leaves a permanent, public record like an internet forum.
Michael
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Hi Michael
I think you forgot the third group
Those that are dumb enough to do it and dumb enough to post about it on a public, traceable, forum
I think you forgot the third group
Those that are dumb enough to do it and dumb enough to post about it on a public, traceable, forum
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The only real dumb ones are the ones that get caught.
Which begs the question: has anyone actually heard of someone getting caught/charged with fraud.
Banks and mortgage companies do not want to turn away investors so it's most likely treated with a wink and a nod. Mums the word. After all the finance business isn't that honest to begin with.
Which begs the question: has anyone actually heard of someone getting caught/charged with fraud.
Banks and mortgage companies do not want to turn away investors so it's most likely treated with a wink and a nod. Mums the word. After all the finance business isn't that honest to begin with.
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Actually there is a third group of which I am a member: those who intend to live in the property for at least a year and then find a great deal on another property and end up moving sooner.
Again, intent is the real key here. In our case we moved a whole house including a baby and a preschooler. We did not intend to move again quickly, and I don't think anyone would doubt our intent.
However, moving in with a suitcase and an air mattress is entirely different, and then it wouldn't matter if you stayed for a night or a year. It would be obvious that you did not intend for it to be your personal residence and it would be mortgage fraud.
And yes, you can get into serious trouble. There was a real crackdown on this a year or so ago and it was all over the newspapers.
Again, intent is the real key here. In our case we moved a whole house including a baby and a preschooler. We did not intend to move again quickly, and I don't think anyone would doubt our intent.
However, moving in with a suitcase and an air mattress is entirely different, and then it wouldn't matter if you stayed for a night or a year. It would be obvious that you did not intend for it to be your personal residence and it would be mortgage fraud.
And yes, you can get into serious trouble. There was a real crackdown on this a year or so ago and it was all over the newspapers.
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[quote user=Sherilynn]Actually there is a third group of which I am a member: those who intend to live in the property for at least a year and then find a great deal on another property and end up moving sooner.
The original post specifies he's not planning on moving in at all. (The NOT was in capital letters).
What you're describing is completely different, and legitimate. I did not intend to impugn anyone following the rules, but merely wanted to emphasize that following the rules is the right course of action. And those who don't follow the rules would be wise not to talk about it in public.
Regards,
Michael
The original post specifies he's not planning on moving in at all. (The NOT was in capital letters).
What you're describing is completely different, and legitimate. I did not intend to impugn anyone following the rules, but merely wanted to emphasize that following the rules is the right course of action. And those who don't follow the rules would be wise not to talk about it in public.
Regards,
Michael
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[quote user=bizaro86]
The original post specifies he's not planning on moving in at all. (The NOT was in capital letters).
Yes, but then he posed the question 'for how long would he need to live in the place before it was not considered mortgage fraud.'
My response was more related to that, with the answer being that if he moved in specifically to put low money down on an investment property then it is fraud regardless.
The original post specifies he's not planning on moving in at all. (The NOT was in capital letters).
Yes, but then he posed the question 'for how long would he need to live in the place before it was not considered mortgage fraud.'
My response was more related to that, with the answer being that if he moved in specifically to put low money down on an investment property then it is fraud regardless.
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For the comfort of mind, I'd be transparent with my intention IMHO. Good luck.
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[quote user=Sherilynn]Yes, but then he posed the question 'for how long would he need to live in the place before it was not considered mortgage fraud.'
My response was more related to that, with the answer being that if he moved in specifically to put low money down on an investment property then it is fraud regardless.
Your post talked about a "third group" of which you were a member. But the two groups I was describing were "people who don't talk about not moving into their rentals after they've called them personal residences."
People don't talk about that because they either don't do it or don't want to get caught.
You're in the first group, people who don't lie on mortgage applications. You're talking about something that sounds similar, but is different based on your intent.
You are of course absolutely right that the specific amount of time isn't the governing factor in whether that's allowed or not, it has to do with intent.
Regards,
Michael
My response was more related to that, with the answer being that if he moved in specifically to put low money down on an investment property then it is fraud regardless.
Your post talked about a "third group" of which you were a member. But the two groups I was describing were "people who don't talk about not moving into their rentals after they've called them personal residences."
People don't talk about that because they either don't do it or don't want to get caught.
You're in the first group, people who don't lie on mortgage applications. You're talking about something that sounds similar, but is different based on your intent.
You are of course absolutely right that the specific amount of time isn't the governing factor in whether that's allowed or not, it has to do with intent.
Regards,
Michael
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The reality is that a very large number of investors begin by purchasing a home with a basement suite having the intent of renting the entire home in the not too distant future and purchasing another for themselves.
This was the case before the mortgage rule changes and will continue to be the case.
Likely no harm no foul as far as financial institutions are concerned. They will be more than happy to hold the mortgage on your next home too. .
This was the case before the mortgage rule changes and will continue to be the case.
Likely no harm no foul as far as financial institutions are concerned. They will be more than happy to hold the mortgage on your next home too. .
My wife and I are currently in a similar situation. We bought our first house three years ago which has a suite. Our intent was to rent out the basement while living upstairs. In two more years when mortgage renewal is due, we want to buy our second property. With that property we want to do the same. Live in it for up to five years then move on. It will be our primary residence until that time. All that being said, what are we going to be required for a down payment. 20% or 5 -10%?
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If your primary intent is to buy the new home as your principle residence, it shouldn't matter that eventually you will turn it into a rental. This is much different than asking "for how long must I live in this place before CMHC will consider that my intent was for it to be my personal residence."