All Forum Posts by: Nimit Gupta

Canada is different than the US for mortgages (and within Canada there are difference among the provinces as well). 

First time home buyers can buy a place with 5% down (if they are living in the home).  If you do 5% down, you also have CMHC insurance which adds up quickly.  Mortgages in Canada come with different terms (eg 1 yr, 2 yr, 5 yr) and fixed and variable rate mortgages.  For the amortization period, go as long as you can (often 30 years) as that will lower your payments.  In 3-4 years, you will not have a lot of equity in the home, so I'm not sure you'd want to refinance (if you plan on trying that, talk the bank because ending your mortgage before the term is up (ie 1 yr, 2 yr) comes with a heavy interest penalty (basically you have to pay out all of the interest remaining for the rest of that term).

As for renting vs investing elsewhere-run the numbers as to what your payments would be if you bought a house including insurance and property taxes and repairs vs renting.  Then what is the difference and if you put that money elsewhere, how much would you make?

Eg if owning a house for the mortgage, insurance and taxes alone would cost you over $3000 a month (mortgage alone on a 25 year amortization for $500K is $3000 a month, goes down to $2700 on a 30 yr mortgage).  If you rented, how much would that cost you each month?  Toronto is expensive, so guessing it might be close to that.  I'm also not sure if you could buy a house for $500K.  A condo, yes in which case you also need to add in condo fees.

1.) As Brayden had mentioned, most lenders will only go up to 80% on a cash out refi. Simplified illustration of this would look like: if your home is worth 100k, and your outstanding loan balance is 70k, then you would be able to pull out 10k in a cash out refinance. At 6.25% down, it would take you about 4 years to reach 80% equity assuming 7% interest rate and 3% annual appreciation. So it would be several years before you can refinance any significant amount, assuming it makes sense to even refinance with whatever prevailing market conditions are during this future time. 

2.) As Zach had mentioned, doing a house stacking strategy is a great way to accumulate properties by taking advantage of low down payment primary residence loans. Your occupancy requirement is only 1 year, at which point you can start your next house search and use the rental income from the first house towards your lending qualifications. 

If your living situation allows, you can house-hack the first home, (renting out portions of your house to offset your monthly costs and boost your savings), to set yourself up to be ready for the next purchase. This is the best way I think to get introduced into RE investing and accumulate properties in the beginning.

Unfortunately, when you first start on the amortization schedule (mortgage payoff schedule), the majority of your payment is going to interest. Which means of the $3,000 mortgage payment, less than $400 of that is actually going to principal. Without doing work to the property, you're going to be relying on market appreciation, and a very slow mortgage pay down in order to build equity.  Also, you won't be able to conventionally refinance a primary residence after only 6 months. The new minimum is 12 months. https://selling-guide.fanniema...

Your best bet would be to either do work to the property that would significantly raise its value, or work extra in your day job or a side hustle to build your next down payment.