Rental Property Investor · Ripon, WI - US · Member since 2015 · 70 posts · 16 votes
Has anyone tried to get mortgages for longer than 30 years? I am thinking if I could try to get a 40-50 year mortgage I could get more cash flow out of the properties in the short term. Are there any companies that will give you a 40-50 year mortgage on an owner occupied house?
I plan on buying a duplex and living in half for a year or two and then rent out both sides.
I have heard that some institutions still offer 30 year in Canada, mostly on residential with a lot of hoops to jump through.
Samuel,
A couple of our residential lenders will still subscribe a mortgage with 30yr amortization, but they take longer (more scrutiny?), so we just decided if a deal does not have enough meat to meet our metrics using a 25yr amortization, then it's not really a deal.
I have heard that some institutions still offer 30 year in Canada, mostly on residential with a lot of hoops to jump through.
Samuel,
A couple of our residential lenders will still subscribe a mortgage with 30yr amortization, but they take longer (more scrutiny?), so we just decided if a deal does not have enough meat to meet our metrics using a 25yr amortization, then it's not really a deal.
Great comment I agree 101%, I actually find people try to justify cashflow with longer terms on forums like these sometimes. Why in your right mind would you want a property with that little principal reduction does not make sense to me at all, you make the majority of your money that way in rentals.
I have heard that some institutions still offer 30 year in Canada, mostly on residential with a lot of hoops to jump through.
Samuel,
A couple of our residential lenders will still subscribe a mortgage with 30yr amortization, but they take longer (more scrutiny?), so we just decided if a deal does not have enough meat to meet our metrics using a 25yr amortization, then it's not really a deal.
Great comment I agree 101%, I actually find people try to justify cashflow with longer terms on forums like these sometimes. Why in your right mind would you want a property with that little principal reduction does not make sense to me at all, you make the majority of your money that way in rentals.
It doesn't make sense(cents) it makes dollars. The lower the debt service each month, the higher the cash flow/month. If I'm 25 years old, I'm either having more cash to spend for 25 years with higher cash flow, or I'm waiting until I'm 50 to reap projected results that are not guaranteed, and that I have no control over. Just look at history. Can you predict what the RE markets, and the financial situation will be 25 or 30 years from now? How many times through history have we seen property values drop to values that are far less than previous years?
My mortgage is locked in. My future profits are not.
Real Estate Agent · Kitchener-Waterloo-Cambridge, Ontario · Member since 2013 · 408 posts · 90 votes
10y
that's not necessarily true at all. You can very easily access your equity as it gets paid down and enjoy the cash any time you want. There major difference is that with a shorter amm you pay less interest over time, I prefer not to give the bank money when I don't have to.
Unless I was using the rental income to pay my bills and eat, I would rather the neutral cash-flow and high pay down. In 1 2 years after purchase I will Refi take out my money and buy another, tax free because I re invested it before claiming it as income.
This maybe makes less sense in the states because your mortgage interest is tax deductible and ours technically is not unless being pulled out and reinvested.
Why not choose interest only loans, in this situation? @Joe Villeneuve, curious about your take.
Yes, interest only loans can work, but that is a different strategy I refer to as a form of "cash like substance". That IO loan has to have specific terms attached to it, and the entrance/exit strategies used on the series of individual properties MUST be treated as a string of properties...and not as indipendant properties. Ubfortuntately, the explanation for this is more involved than this format would allow. I would be happy to explain privately though.
If you don't know how to use this type of loan correctly, all it will do is postpone a future problem, that you have not planned a solution for. If you know how to use this type of loan, the solution is really quite simple...and an IO loan could turn into a goldmine situation for you.
Trouble is, too many REI treat IO loans like credit cards, of as Popeye's best friend used to say, "If you give me a hamburger to day, I'll..."