I am thinking about investing in the rental industry and was wondering whether it'd be ideal to take out a mortgage as an owner-occupied and get the lowest rates for mortgage and then stay in the property for a couple of months and then rent it out. Would that cause any legal repercussions and will I be considered dishonest? My broker was telling me that If I am not living in it then I should go for the rental investment mortgage that is a little higher than the owner-occupied mortgage rates. And, If I do tell them that it's going to be owner-occupied then I will be considered dishonest and will have legal repercussions. Just want to have an understanding of this so I make the best decision for myself without being dishonest. 

FYI: I am based out of Manitoba, if that helps. 

@Saad Khan

From my understanding, you have to live in the property for one year if you are purchasing an owner-occupied property. Check out this article. 

https://mymortgageinsider.com/

Sincerely, 

Josh

You said you are from Manitoba, so I'm assuming the property is in Canada.  You need to live in it.  Having said that the rates are the same for owner occupied and rentals.  The only difference is for rentals you need 20% down payment.  For owner occupied you can do as little as 5% down, but anything under 20% you have to pay CMHC insurance.  The insurance is added to the cost of the mortgage, but it is often a lot (almost the difference between what you put down and 20%).

I talked to my bank the other day and for a 5 year fixed, they could do 2.29%.  That was one of the big banks.

@Saad Khan How long will you hold it? Loans are designed so you pay more interest up front so the interest paid after 10 years for a loan at 3% isn't that much less than one at 5%. Probably worth it to not get in trouble for mortgage fraud.

Hi Saad. From my experience if you are buying as a rental you need a larger downpayment (25%) whereas if you live in it you need 20%,. I have bought properties I intended to live in but decided to rent out instead, in my opinion there is nothing wrong with this, peoples circumstances change all the time. I am also in Canada.

@Joshua McMillion

Your understanding is wrong.

@Saad Khan

What you have described is 100% mortgage fraud. The penalty for this extends all the way from massive fines to jail time.

There is not, never has been, and likely never will be a specific number of days that you can live in a property and call it your primary residence. The CRA requires you to prove your intention. So, if your intention was to use it as a rental, doesn’t matter how long you live in it, if you obtain it under the guise of a primary residence you are committing mortgage fraud. The same goes for if you lives in it for a week, got a transfer at work, and made $50k selling it. You need to be able to prove your intention was to use it as a primary residence.

The “one year” or “60 days” or “my friend said he knew a guy who..” myths are exactly that, garbage myths repeated by uneducated people to the detriment of others.

@Frederick P wallberg

Thanks for the clarity. I will reach out to my friend that is a lawyer and get his opinion. 

Sincerely, 

Josh

@Joshua McMillion

Unless he/she is a Canadian based real estate specific lawyer, they may also be spreading the same common misinformation. I’ve even heard that line at real estate conferences. Heck, I was at one where a guy was kind enough to stand up, interrupt the presenter and say “I’m an accountant, frequent CRA auditor contact/ consultant, and what you just described is completely false according to Canadian tax law.”

The crickets the arrived after that were friendly.

Thank you @Joshua McMillion @Frederick P wallberg @Jason Dasanjh @Peter M. and @Theresa Harris for the insight. It's good to have this clarification as I don't intend to commit any fraud. Glad that you guys were able to answer my question. Thanks again :)

Originally posted by @Jason Dasanjh :

Hi Saad. From my experience if you are buying as a rental you need a larger downpayment (25%) whereas if you live in it you need 20%,. I have bought properties I intended to live in but decided to rent out instead, in my opinion there is nothing wrong with this, peoples circumstances change all the time. I am also in Canada.

If you live in it, you can buy with as little as 5% down.  You will pay for CMHC insurance.  For rentals, you need 20% down.

@Saad Mushtaq I just closed on a duplex in Manitoba. Even though my 18 year old is going to live in one unit, Because it’s not going to be MY primary, I had to put 25% down, but I got a 5year fixed rate mortgage at a 1.75% rate. I went through a mortgage broker as well, I can give you his contact info if you send me a pm.