Real Estate

Mortgage for Second Property - Need Advice

  • Last Updated:
  • Jul 15th, 2020 9:17 am
[OP]
Newbie
Mar 31, 2020
40 posts
10 upvotes

Mortgage for Second Property - Need Advice

Just thinking too far ahead...

With an outstanding mortgage of about 600K, no other loans and about 200K in family income, is it possible to obtain a mortgage for second property for about 1 mil with 20% down? The first property would become investment property and could expect it to earn 2500 before taxes.
10 replies
Deal Addict
Jan 9, 2010
2576 posts
2335 upvotes
I think your answer is better posed to a mortgage broker but to me that sounds severely leveraged. You're talking about $1.4M in mortgage debt on $200K in annual income not counting the rental income, or 7x your income in borrowing. Even if you take your rental income into account that's 6x your income and I don't think any lender takes into account 100% of rental income.
Deal Guru
Feb 9, 2009
12360 posts
11249 upvotes
How much is your home worth is maybe the biggest question to determine the answer.

If your home is 900k not really, if its 5 mil then you could with a blindfold on

So that is the most important missing part of this equation.
Sr. Member
Dec 23, 2012
504 posts
499 upvotes
RICHMOND HILL
should be doable - but it literally costs nothing to reach out to a broker/lender and ask.
Sr. Member
Dec 28, 2010
841 posts
366 upvotes
Toronto
Sanyo wrote: How much is your home worth is maybe the biggest question to determine the answer.

If your home is 900k not really, if its 5 mil then you could with a blindfold on

So that is the most important missing part of this equation.
Interested to learn how a rough calculation is done, to get some basic estimates. Any recommendation for an online calculator ?
The banks and brokers mostly ask for all income,expense and debt details, so must be some spreadsheet calculation. Does years of banking with one bank give any advantage ?
Member
Dec 12, 2011
203 posts
224 upvotes
Toronto
How much equity does your house have? How much other debt do you have? Are you looking for an A lender only? Me and the wife were in a similar situation 1 year ago. We were looking to buy a new primary res while renting out our prev home. We had over 500k in equity in our house, about 300k owing, no personal debts, and still had to put down about 40% for a house at 850k. Our mortgage broker from TD said almost nobody was getting approved for rental properties from them without a significant downpayment. The equity in our house we were told means very little to them. I know of guys that purchased rental properties in that time with c lenders and are very heavily leveraged at this point, paying 10% on their new mortgage but that's something I would not do. Better for you to speak to a mortgage broker and once you give them your numbers, they will let you know. I am very certain you can get a mortgage, but with who that will depend.
[OP]
Newbie
Mar 31, 2020
40 posts
10 upvotes
clydelee2020 wrote: How much equity does your house have? How much other debt do you have? Are you looking for an A lender only? Me and the wife were in a similar situation 1 year ago. We were looking to buy a new primary res while renting out our prev home. We had over 500k in equity in our house, about 300k owing, no personal debts, and still had to put down about 40% for a house at 850k. Our mortgage broker from TD said almost nobody was getting approved for rental properties from them without a significant downpayment. The equity in our house we were told means very little to them. I know of guys that purchased rental properties in that time with c lenders and are very heavily leveraged at this point, paying 10% on their new mortgage but that's something I would not do. Better for you to speak to a mortgage broker and once you give them your numbers, they will let you know. I am very certain you can get a mortgage, but with who that will depend.
I dont have much equity at the moment, but I am planning for the next 2-3 years. What I am trying to find out is, should I make additional payments and increase my equity or should I prepare for a big down payment.
[OP]
Newbie
Mar 31, 2020
40 posts
10 upvotes
Thanks everyone, I will check with a mortgage broker.
Deal Fanatic
Aug 25, 2005
5370 posts
2598 upvotes
keep us posted, im interested and in a similar siutation as you
Deal Guru
User avatar
Mar 23, 2008
13006 posts
9952 upvotes
Edmonton
Toss001 wrote: I dont have much equity at the moment, but I am planning for the next 2-3 years. What I am trying to find out is, should I make additional payments and increase my equity or should I prepare for a big down payment.
Something to consider... Taking money out of one property (your now "investment" property) and using it to fund the purchase of new "personal" property means the interest payments on the amount taken out are no longer tax deductible. For that reason, my first thought is that you're better off socking away the money in a separate investment tool, and leaving the mortgage on your first property as high as possible (within reason). But you really should be talking this over with an accountant. There are numerous aspects that probably need to be looked at, and you're not likely to share that all in here.

C
Deal Guru
User avatar
Mar 31, 2008
12757 posts
2845 upvotes
Toronto
Have CASH ready. Don't increase payments. Liquidity is king. But to be honest, they're going to ask for significant asset coverage. Meaning how much other liquid 'equity' do you have. Now if you're moving, and keeping original house as investment, it's a lot easier than just adding a 2nd property where you'll prob need to show another 100K in more liquid assets. It's not a downpayment, but from my experience, it's for just additional asset coverage.

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