Mortgage Change Options

[KimReedSmith]

I am looking at moving and renting out my current property.



Currently we have a 25 year amortization, variable rate of prime minus 0.75%, and are making 26 payments annually.



Once the property becomes a rental property are there there any draw backs (are we even able to) change our amortization to 30 years (versus 25 years) and change to monthly payments (versus biweekly) to make the property cash flow better?



Currently this would make a monthly difference of $240.



Thanks.

 

[Aneta]

It is good strategy to make your mandatory mortgage payments on a rental as low as possible, in case the unexpected comes up and you need a cashflow buffer. You can always pre-pay more manually if you like. If you see consistently that you have healthy cashflow and rents are good, you can then consider increasing your scheduled payment. You need to talk to your lender about your requested changes, it probably should be no problem. The re-amortization will depend on what your original mortgage agreement was with respect to amortization. They can't give you an amortization longer than what you originally got.

 

[RobMacdonald]

It really depends on the lender as to what your options are going to be. Contact them, tell them what you would like to do, leaving out the information that you may move out of the property. Depending on whether your mortgage is conventional or high ratio, readvancable or not, your options will vary.



After you've found out your options with the existing lender, contact a mortgage broker and determine what your best alternatives in the market will be.



If your mortgage is conventional, you may be able to go as long as 40 years. This decision will be part of your overall plan, and without knowing your income and other financial information, it's not really possible to make a sound recommendation.



Stretching out the amortization is not always the best plan, as you have to take into consideration your debt servicing limit.



Basically, get the info from your current lender, then get a consultation from a mortgage broker familiar with REIN.

 

[steven]

Hi, i suggest that you consider getting an expert advice on the topic.