New to Real Estate · Montréal, Quebec · Member since 2019 · 3 posts · 0 votes
Hello, I'm brand new to the BP scene and Real estate investing. I am currently trying to educate myself and plan for my eventual start in REI.
I've read the BP ultimate starters guide and am now reading a book on flipping houses, however, it seems most of the material I've come in contact with is based on the American market.
What type of real estate financing options do Canadians have? I tried to google this but not much information regarding the Canadian market, or maybe I'm just looking in the wrong places.
EDIT: I should mention I'm looking to start investing in Montreal, Quebec if that makes any difference.
Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
6y
Hey @Bilal Kozak there are basically 4 main types of Mortgage lending options:
Major Banks, Credit Unions, Monolines etc.- Subject to federal lending regulation, lowest interest options, can buy with as little as 5% down.
Alternative lending options (easier approvals for people with weaker credit or unconventional income sources) Full bank underwriting process. Requires at least 20% down, interest rates range from 3.8-5.99% depending on the file.
Private Lending (highest interest option but easiest to finance generally based on equity in the property) - Requires at least 20% down - Interest rates start around 9%
Vendor Take Back Options (this is negotiated directly with the seller where the seller will mortgage you the property for a monthly payment including interest). Often used when the property itself isn't easy to finance / sell or if the seller simply wants to earn extra interest and doesn't need a lump sum payout.
Working with a good mortgage broker (like me lol) will give you access to navigating all of this.
Rental Property Investor · Hamilton, Ontario · Member since 2016 · 285 posts · 181 votes
6y
Hey @Bilal Kozak there are basically 4 main types of Mortgage lending options:
Major Banks, Credit Unions, Monolines etc.- Subject to federal lending regulation, lowest interest options, can buy with as little as 5% down.
Alternative lending options (easier approvals for people with weaker credit or unconventional income sources) Full bank underwriting process. Requires at least 20% down, interest rates range from 3.8-5.99% depending on the file.
Private Lending (highest interest option but easiest to finance generally based on equity in the property) - Requires at least 20% down - Interest rates start around 9%
Vendor Take Back Options (this is negotiated directly with the seller where the seller will mortgage you the property for a monthly payment including interest). Often used when the property itself isn't easy to finance / sell or if the seller simply wants to earn extra interest and doesn't need a lump sum payout.
Working with a good mortgage broker (like me lol) will give you access to navigating all of this.
Specialist · Vancouver, BC · Member since 2016 · 315 posts · 145 votes
6y
to add to what Jacob wrote: There are A, B and C Lenders within the cat1 and 2. Not all private lending require 20%. The less you put down, the higher the rate. There are also RRSP mortgages (arms length and non-arms length). And of course the Bank of MOM&DAD. Good luck.
@Bilal Kozak Also consider the terms of the loan if you are planning on flipping vs longer term rental. if you flip, you might have higher interest rates since you will be borrowing the money for a shorter period of time. If you are buying to rent long term, go for the longest mortgage period (e.g., 25 years) that the lender will allow. This will make your payments low and if you want to pay it off faster, you can add extra payments.
@Theresa Harris Thanks, why wouldn't I want the payments to be lower if I'm flipping a house? Wouldn't that mean I need more cash to make payments while I'm rehabbing the house?
@Bilal Kozak If you are flipping, you want your payments as low as possible, but the lender is going to want a premium for a short term loan. The flip should be quick and you want to make sure you have the money long enough and there are no penalties should things go faster than expected.
Rental Property Investor · Saint-Hubert, Québec · Member since 2017 · 70 posts · 44 votes
6y
@Bilal Kozak
Hey Bilal, welcome to BP!
From my experience Montreal is quite an expensive market, you're going to need a good down payment and move fast on offers because it's a very competitive market.
Pm me if you want to discuss, I'm from the south shore of Montreal.
One I didn’t see listed is the Federal Government. ...Meaning taxpayers, most especially those in taxpaying provinces. They’ll jump right in with you as a partner if you’re a 1st time homebuyer crying the blues over detached home prices. ..because of course everyone employed 36.5hr/week or more should be able to afford a detached 3 bed 2.5 bath (usually new build) house no more than 15 minutes from downtown in all major cities...