When we first begin our financial education we are hungry for knowledge. We read everything that comes our way on the topic of real estate; books with titles like “Nothing Down” or “97 Tips for Real Estate Investors.” One consistent theme throughout all these texts is the importance of using leverage. With a recent change in the CMHC rental property program, some lenders are making it easier to do just that.

There are two mortgage lenders who will now finance 100% of the cost to buy a rental property. There is no application fee to do this and they will even offset the cost of the house purchase by calculating in market rent for the new property and adding it to your income.

Concerned about cash flow? You can get a 40 year amortization on your new property to reduce payment size. Sounds pretty good doesn’t it? Let’s take a look at some of the expenses.

First, CMHC isn’t going to let you off the hook that easy. There is an expense for this purchase; an added premium which you can also make tax deductible since you are financing a 100% of the property’s value. The interest on the mortgage is also tax deductible. Talk to your accountant about the possibilities.

The lenders are offering the current best interest rates to secure rental properties. With the recent cut in the prime lending rate and another cut planned for March 4th, we are suggesting that most of our clients go with an adjustable rate mortgage for now. In fact, a recent Globe and Mail article predicted that the Prime Rate in Canada could drop as much as 1.25% in 2008, but we will have to wait and see.

So what does it take to qualify to get 100% financing on a rental property? First, you need good credit. This means a minimum beacon score of over 680 for all applicants. Second, you have to be able to prove income. If you are self-employed the lender is going to want to check your past two years notice of assessment, company financials, and they want to confirm that you have been in the same line of work for at least 2 years.

As well, please keep in mind they will only finance single family units and duplexes at 100%, triplexes and fourplexes they will finance up to a maximum of 90%. To refinance a rental property they will go up to 95% loan to value.

Contact Jerry Schindel at 403-287-0174 or jerry.schindel@migroup.ca or visit us on the web at www.calgarymortgageagent.ca.

From Calgary Real Estate Market Blog:

Buying a house is the biggest purchase that most people make in a life, and how you choose to finance it is a part of how you meet your personal and financial goals in life.

If anyone knows of reputable mortgage brokers in Calgary that have a focus on their client’s interests, or credible sources for mortgage information with a focus on financial planning, please feel free to post your recommendations below.

Assumable Mortgages in Calgary

Did you know that Alberta is the only Canadian province to allow assumable mortgages? That makes assumable mortgages a popular choice Calgary. In part one of our series on assumable mortgages in Calgary, we will look at how Assumable Mortgages work.

How does an Assumable Mortgage work?

Let’s assume a Calgary property owner is selling their Kensington condo for $398,000. This condo owner still has $353,000 left in to pay in their existing assumable mortgage loan.

An interested buyer comes along and would like to buy the condo. In Calgary, thanks to Alberta real estate regulations, the interested buyer only needs $45,000, the difference between the existing mortgage and the asking price on the condo.

After that, they assume the previous owners’ mortgage and become Calgary condos owners! Next time we will look at the benefits to assuming a mortgage.

We’ve all heard the old stories. A successful, self-employed Canadian who can work wonders in his or her professional life can’t manage to secure a decent mortgage for a home. It strikes us as both ridiculous and unfair – given that nearly one Canadian worker in six is now self-employed. After all, these are some of the most independent and ambitious people in the country.

Thank goodness that times have changed for the self-employed. Policy changes at the Canadian Mortgage and Housing Corporation (CMHC) have begun to acknowledge the contribution and financial status of self-employed Canadians.

These days, self-employed homebuyers have the same access to mortgages as their salaried counterparts. It doesn’t matter what the nature of your income structure: whether you work on contract, whether your work is seasonal, or whether you’re a small business owner or an independent professional.

Now, newly self-employed Canadians can also get credit for their past work experience. Until early this year, you needed to demonstrate at least two years of employment in your own business, but that rule has been changed. Now, if you have two years experience in your field of expertise – whether you were salaried or self-employed – you can meet the new CMHC standard.

The new guideline is great news for self-employed Canadians who have extensive experience in their chosen field, but who are newly in business for themselves in that field. For example, maybe you’ve been building cabinets for years in a salaried workplace, and have decided to step out on your own. Now you can get credit for your experience.

The CMHC guidelines specify that you should be performing essentially the same function with the same skill requirements for your past experience to qualify. For the tens of thousands of Canadians pursuing their dream of self-employment in their field of expertise, the new guideline is great financial news.

The CMHC guidelines apply to any mortgage insured by CMHC, from any institution. It’s worth noting, of course, that some lending institutions are friendlier to the self-employed than others. Many lenders are still most comfortable with the traditional parameters for verifying employment and income. A steady stream of pay stubs is the simplest method of assessing your ability to service the mortgage debt.

If you’ve been self-employed for a few years, your lender may want to see detailed financial statements for the most recent years. That can be a problem. An astute business owner with a good accountant will be working hard to minimize taxable income for the business: a smart financial strategy. But according to traditional lending formulas – that business strategy could flag you as a high-risk borrower.

The most flexible and innovative lenders have discarded the old formulas for their self-employed clients. Some of the best mortgages for self-employed Canadians don’t even require proof of income. You could qualify for your mortgage simply on your own good credit and employment history.

If you’re self-employed, or considering taking the plunge into business for yourself, the latest mortgage news is encouraging. Check out your options and get the credit you deserve.

- Sherry Jenkins is a Mortgage Consultant with Mortgage Intelligence. Feel free to contact her at (403) 804-3694 or jenkins.s@mortgageintelligence.ca