What happens to highly leveraged property at the end of mortgage term

[SamPerren]

Good morning,

I recently purchased my first investment property in March before the mortgage rule change with only 5% down and a 35yr amortization period. The property is currently cash flowing and will be doing even better when the rents are increased(I just won arbitration with the current tenants), but I doubt there will be 20% equity when it comes time to refinance.

I am from BC, I have a primary residence and the investment property is a residential property up/down duplex. Does anyone know if I will be able to renew my current mortgage with my current lender(National Bank) without having the new minimum 20%equity?

I guess my real question should be, can anyone refer me to a good accountant/lawyer/mortgage broker who could answer this and other questions I have? I should have built a good team prior to jumping in, but I rushed due to the rule change anouncement and now I have to play catch up.

Thanks,

Sam

 

[JimWhitelaw]

Regarding your investment property, it will depend on the lender. Most top-tier lenders will renew without doing a new appraisal, etc. if you are current and have a good payment record. Some lower-tier lenders won`t though. When does your investment mortgage term expire? If it`s a few years out, there may be different rules in place then anyway.

For your principal residence, the new 20% requirement does not apply - the change in March was only for new investment properties.

 

[SamPerren]

Thanks

I may have to move out of town for work for several years, if I do and rent out my primary residence, and the the status of my primary residence becomes a rental property, I may have to renew the mortgage term while it is a rental. The term closest to expiry is 3 years away.

What is the difference between Top-tier and Lower-tier lenders. My primary residence is ING direct and Investment Property is First National, what tier are these?

Thanks again for the reply, being new to this it sure helps to have this forum.

Sam

QUOTE (JimWhitelaw @ Sep 9 2010, 06:59 AM) Regarding your investment property, it will depend on the lender. Most top-tier lenders will renew without doing a new appraisal, etc. if you are current and have a good payment record. Some lower-tier lenders won`t though. When does your investment mortgage term expire? If it`s a few years out, there may be different rules in place then anyway.

For your principal residence, the new 20% requirement does not apply - the change in March was only for new investment properties.

 

[Thomas Beyer]

QUOTE (sjperren @ Sep 9 2010, 01:08 AM) .. Does anyone know if I will be able to renew my current mortgage with my current lender(National Bank) without having the new minimum 20%equity?
Depends on lender. They do not have to renew any mortgage. Most do, without qualifying, at the then current (and expensive) "rack rate" which is often 1 to 1.5% above the best competitive rate available.

if you have a high ratio CMHC mortgage you have a 25 or 30 year insurance and can shop that CMHC insurance certificate around .. as many banks will lend as the risk to bank is essentially 0 i.e. if you default CMHC will pay bank [and come after you]!

 

[RobMacdonald]

Hi Sam,

Both those banks would be considerd A lenders or top tier. I wouldn`t expect you to have any issues renewing with them.

In regards to your residence, there is nothing stopping you from moving out of town and turning the property into a rental, even if the LTV is higher than 80%. You may not have any options at maturity other than to renew with the existing bank, but as I mentioned I don`t think you would have troubles renewing. Both those companies still finance rental properties.

Feel free to call me directly if you have other questions.

 

[SamPerren]

Thanks to everyone for the reply. This will make my future planning much easier. I will call you Rob if I have other questions.

Thanks again,

Sam

QUOTE (RobMacdonald @ Sep 9 2010, 11:45 AM) Hi Sam,

Both those banks would be considerd A lenders or top tier. I wouldn`t expect you to have any issues renewing with them.

In regards to your residence, there is nothing stopping you from moving out of town and turning the property into a rental, even if the LTV is higher than 80%. You may not have any options at maturity other than to renew with the existing bank, but as I mentioned I don`t think you would have troubles renewing. Both those companies still finance rental properties.

Feel free to call me directly if you have other questions.

 

[RussellWestcott]

QUOTE (sjperren @ Sep 9 2010, 01:08 AM) I guess my real question should be, can anyone refer me to a good accountant/lawyer/mortgage broker who could answer this and other questions I have? I should have built a good team prior to jumping in, but I rushed due to the rule change announcement and now I have to play catch up.

Thanks,

Sam


Sam to help you with your question about building your team. You should seriously consider becoming a REIN™ member. If you want to surround yourself with the most knowledgeable, and investors who are taking action, REIN™ membership will serve you well.

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If you would like to check out a meeting and see if membership is for you, you can always attend one of our meetings as a guest (the meetings are typically only reserved for members) but we do set aside a few seats for people to attend if they are serious about taking their investing to the next level.... You can read the details of the guest program, by clicking here