First time Investment down payment of 10%?

Question

for a first time investment down payment of 10% Will that be sufficient in Most Areas? (here in Canada British Columbia) Or do most as do i have to go the Traditional route and have to put a down payment of 20% or more? what do they check other than your Credit History and such regarding this issue? Thanks!

Roy N. · Answer

@Paul MacInnis

Thanks for mentioning that.  I never depreciate properties held in my own name as, for me, it is always a temporary measure before they are rolled into a holding company and I do not wish to deal with the CCA recapture.

For properties held in a corporation, I have yet to experience that ... perhaps the lenders expect real estate holding companies to take all possible deductions (given they are paying at the top marginal tax rate)?

Paul MacInnis · Answer

@Roy N. - I've also learned that lenders are also using rental income based on tax returns now....which can be problematic for investors who are depreciating their properties and basically pushing the net income down to nothing.   It's  a balancing act now of showing enough return to continue qualifying but minimize tax hits at the same time!  Accountants are key!

Paul MacInnis · Answer

@Roy N. - I will be switching to not depreciating - my accountant has been....and to be honest, I was being lazy and not fully understanding the repercussion......it's a good short term tax saver....but long term im kicking myself.  I also need to learn more about the holding company concept....especially bringing in non-real estate company shares, etc

Roy N. · Answer

@Tajinder Kandola

To purchase a residential property in Canada with a down payment less than 20%, will require the mortgage be insured; either though CMHC or one of the private insurers (Genworth, Canada Guarantee).   With insurance, a downpayment of 10% is available on an owner occupied property of 1-4 units or a (SFR?) second home, not a pure rental property.

You will have to maintain your residence in the property to qualify as the program is not intended for pure rental properties.

Your lender performs all of the vetting on your application and it is the lender who applies for the insurance (as the insurance protects the lender, not you).  In addition to pulling your credit history, most lenders will ask for your NOAs for the past three years and a statement of personal worth with paperwork (account statements) as backup.  If you are including income from other rental units as a component of your income, they will typically want to see the leases and the corresponding sections of your tax return(s).

Roy N. · Answer

We do, but this is an appropriate forum for a finance question regardless of the jurisdiction in which OP is operating.

Chris Mason · Answer

We really need to have a forum for "Canada Specific Questions."

First time Investment down payment of 10%?

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