Financing student rentals: lenders see them as “the plague” of properties

An area of mortgage expertise I focus on is financing and refinancing rental properties. As a rental property owner myself, most clients appreciate the first-hand knowledge on the pros and cons of owning real estate as an investment.  I have made some great decisions with real estate and also some bad ones. 

Student rentals are popular in Guelph since it’s a university town. But they’re becoming more challenging to get good mortgage financing on because of the perceived risk lenders have. As a mortgage broker, we have access to many sources of financing. I’m finding that most mortgage-lenders are not offering competitive mortgage financing on student rentals.

Here are some things that you need to be aware of when buying a student rental or refinancing it to access the equity for future investments:

• In most cases the finance company will approve the mortgage based on the borrower qualifications. Where I’ve seen problems arise is through the appraisal of the property.  Lenders are now conditioning appraisals on almost all conventional mortgage loans.  Although you may have been pre-approved or approved for the mortgage loan, the student rental property will be an issue with most traditional mortgage lenders.  If you’re buying a new student rental be sure to have the appraisal completed before the financing condition is up.  This can save you a lot of last minute problems on the closing day.

• For those mortgage lenders who will finance a student rental, you may be required to put up to 35% as a down payment versus 20% which is typical on a regular residential rental property.

• If you son or daughter will be living in the property while they are going to school, these properties are viewed differently than a student rental property purely for investment purposes. Your mortgage professional should be able to give you advise you on how to structure the mortgage loan to benefit you financially. Also seek the advice of an accountant to discuss the capital gains implications once you sell the property.

I’ve rented to students and I find most are respectful of the property and make good tenants.  As an investor, student rentals typically have good cash flow. The rent is traditionally charged per student per month and in Guelph the rent per month per student is about $500.

When you buy a student rental ensure you work with a mortgage professional that has experience financing them and can take you through the process so that you get a mortgage approval, with a competitively priced mortgage.

If you’d like to discuss your own mortgage situation, I would welcome your call or e-mail! Please contact me at: 

-          tel: 519-763-3900 ext.1001; or,

-          via e-mail at Lastovic.s@mortgagecentre.com

Think you can't qualify to buy a home...think again...

I just had a BBQ at my house and invited some of my clients to it. It was a great opportunity to get to know them better and to thank them for their business.  One message that kept coming up during friendly conversations at the BBQ, was that they were surprised they could get a good mortgage. A few of my clients had mentioned to me that they were turned-down for a mortgage at their own bank and even discouraged by their friends or family.

Have you wanted to buy home, but think you can’t qualify for a mortgage? Here are some common misconceptions about qualifying for a mortgage.

Myth:               I don’t have a down payment I can’t qualify for a mortgage.

Fact:              There are mortgage options for people with good credit history and job stability, but don’t have the full 5% for the minimum down payment. Some mortgage lenders will lend you the money for the down payment.  Rates are normally about 2% higher than the best discounted rate.  The rate would still be below 5.5% but you would not need a down payment!  This is a great way to get into a home, if you’re having a hard time saving for the down payment.

Myth:               I was turned down by my own bank before for a mortgage – I won’t be able to get one now.

Fact:             There are options for people who have been turned down by their bank, that are cost effective. For example, some banks will turn you down for a mortgage, if you haven’t been employed with the same company for a three full years. As a mortgage broker, if you have a full-time job and are no longer on probation, even if you’ve only been at the job for a few months, you likely would be able to get a mortgage.

Myth:               Mortgage brokers charge a fee. I should go to my bank first.

Fact:              Mortgage brokers have become one of Canada’s top choices for people looking to buy a home or investment property.  That’s because they offer great rates. If you have good credit and job stability you can get better rates through mortgage brokers and there are no extra fees!

If you're interested in how you can qualify for a mortgage please call me at 519-763-39 ext.1001 or e-mail me at lastovic.s@mortgagecentre.com