JV- Should my name be on the Mortgage?

[jarrettvaughan]

I am about to embark on my first investment property which will be a JV. My partner is able to use all of his credit to get the mortgage and we are spliting the down payment and expenses 50-50. Since he does not need my credit to get the mortgage, is there any benefit for me to be on the mortgage? Also, are there any negative aspects for me to be on the mortgage?

Also, the properties we are looking at are in Red Deer, any insight on the market there is welcomed.

Thank you so much for your help!!!

 

[RussellWestcott]

Congratulations on your actions...
You may or may not have read this post Click here

That should give you some direction.

The benefit to being on the Mortgage is at closing you will be able to be on the Title. The downside, MAY be that it may hinder your abilities to qualify for more mortgages... but that is a conversation you need to have with your Mortgage Broker.

Regarding Red Deer Click here to read this thread. As well you may want to grab a copy of Don`s Property Goldmine Scorecard (appendix of his book Real Estate Investing in Canada), and you can see the model of how to analyze a region.

Cheers

 

[jarrettvaughan]

Thank you very much for the direction, those links were helpful.

QUOTE (RussellWestcott @ Nov 7 2007, 09:47 AM) Congratulations on your actions...

You may or may not have read this post Click here

That should give you some direction.

The benefit to being on the Mortgage is at closing you will be able to be on the Title. The downside, MAY be that it may hinder your abilities to qualify for more mortgages... but that is a conversation you need to have with your Mortgage Broker.

Regarding Red Deer Click here to read this thread. As well you may want to grab a copy of Don`s Property Goldmine Scorecard (appendix of his book Real Estate Investing in Canada), and you can see the model of how to analyze a region.

Cheers

 

[Peter]

QUOTE (jarrettvaughan @ Nov 7 2007, 11:32 AM) I am about to embark on my first investment property which will be a JV. My partner is able to use all of his credit to get the mortgage and we are spliting the down payment and expenses 50-50. Since he does not need my credit to get the mortgage, is there any benefit for me to be on the mortgage? Also, are there any negative aspects for me to be on the mortgage?

Also, the properties we are looking at are in Red Deer, any insight on the market there is welcomed.

Thank you so much for your help!!!

Hi Jarrett,

weather its in your long term best interests to go on the mortgage depends not only on your personal financial situation, but also on your long term investing plan. While being on mortgage and title can definately be beneficial if the property is generating a rental surplus, the opposite is true if the cashflow is negative.

If the property is generating a surplus, but you don`t need it to qualify, you might be best served not being on the mortgage as it would allow to borrow more in the future in cases where there not be a JV or the JV can`t qualify on thier own. Talk to your broker about your long term investing goals, the size of the portfolio that you want to develop and the types of properties you will be aquiring. this information will allow your broker to evaluate your options from a "portfolio" perspective and therefore help you to structure your applications in such a way as to maximize the amount of borrowing you could be eligible for.

Thanks, Rebecca (for Peter Kinch)

 

[jarrettvaughan]

Thanks, that is great advice Rebecca. My long term plan is to purchase as many properties as i can use the maximum amount or OPM. This being the case, I understand that I should not be on the mortgage as that will affect my future ratios and credit. Is it possible to be on the house title but not on the mortgage? Also, can you explain the benefits of being on the mortgage if the property has a positive cash flow (I understand how being on the title would be benificial)?

Thank you very much for your help.

QUOTE (Peter @ Nov 7 2007, 02:36 PM) Hi Jarrett,

weather its in your long term best interests to go on the mortgage depends not only on your personal financial situation, but also on your long term investing plan. While being on mortgage and title can definately be beneficial if the property is generating a rental surplus, the opposite is true if the cashflow is negative.

If the property is generating a surplus, but you don`t need it to qualify, you might be best served not being on the mortgage as it would allow to borrow more in the future in cases where there not be a JV or the JV can`t qualify on thier own. Talk to your broker about your long term investing goals, the size of the portfolio that you want to develop and the types of properties you will be aquiring. this information will allow your broker to evaluate your options from a "portfolio" perspective and therefore help you to structure your applications in such a way as to maximize the amount of borrowing you could be eligible for.

Thanks, Rebecca (for Peter Kinch)

 

[Peter]

QUOTE (jarrettvaughan @ Nov 7 2007, 05:01 PM) Thanks, that is great advice Rebecca. My long term plan is to purchase as many properties as i can use the maximum amount or OPM. This being the case, I understand that I should not be on the mortgage as that will affect my future ratios and credit. Is it possible to be on the house title but not on the mortgage? Also, can you explain the benefits of being on the mortgage if the property has a positive cash flow (I understand how being on the title would be benificial)?


Thank you very much for your help.

Hi Jarrett,

How to qualify and how to structure your porfolio for the most benefit is very complicated and dependant on alot of things - namely your application and your existing and projected portfolio. It would really need to be reviewed and analyzed in the context of your long term plan to determine where and when you should be or need to be on the mortgage.

If the property has a positive cashflow, its generating a surplus that can be added back to income to help you qualify however, its really key to manage the benefit of the concept of rental surplus, vs lending room with the lenders. Each lender has different qualifying criteria, different products and differnt lending limits. If you do not need the rental surplus to qualify as your income is sufficient, it may be best not to go on the mortgage, and save the lending room. If you will need to use a different lender with different qualifying criteria for your next deal, and need the surplus, you might want to go on. By structuring your financing from a portfolio perspective, if you make a move now, the idea is that it will set you up to still be able to get financing 3 or 4 properties down the road.

Generally, you need to be on mortgage to be on title and vise versa (though there are exceptions). You may be able to still include that property in your net worth statement, if its necessary, though often hard to confirm since you are not on title.

Thanks, Rebecca