Will 2nd property affect mortgage on principal upgrade?

Middal wrote: ↑ We have a primary and one rental property.. the rental was bought within past 2 years so our equity is almost non existent (price has gone down a bit from what we paid)

Wondering if the 450k mortgage on this property impacts us when selling and purchasing a new primary?

We report rental income(loss this year) for the property on our taxes - is that the only factor that will impact us? Or will lenders reduce our qualified amount by what's outstanding on 2nd property?

Toukolou wrote: ↑ You hold a mortgage, it will be factored into any additional financing you are seeking.

The loss you suffered will impact your overall qualification negatively (less income earned).

Middal wrote: ↑ We have a primary and one rental property.. the rental was bought within past 2 years so our equity is almost non existent (price has gone down a bit from what we paid)

Wondering if the 450k mortgage on this property impacts us when selling and purchasing a new primary?

We report rental income(loss this year) for the property on our taxes - is that the only factor that will impact us? Or will lenders reduce our qualified amount by what's outstanding on 2nd property?

clutch31 wrote: ↑ If I'm not mistaken, it will impact your debt to income ratio.

But your rental income will also come into the ratio, with some discount.

So, something like
(Household income + w * rental income) / (all your mortages)

Middal wrote: ↑ Understand the loss part, but for the mortgage - will it be factored at 1:1?

For example if our HH income would normally qualify around $1.25M, does the 2nd mortgage mean we would only qualify for $800k?

I can't imagine that's the case otherwise how would people qualify for multiple properties?

Middal wrote: ↑ So in theory if my rental is break even, it should have no (or minimal) impact in my total debt service ratio

Middal wrote: ↑ Understand the loss part, but for the mortgage - will it be factored at 1:1?

For example if our HH income would normally qualify around $1.25M, does the 2nd mortgage mean we would only qualify for $800k?

I can't imagine that's the case otherwise how would people qualify for multiple properties?

Toukolou wrote: ↑ Yes, that's exactly what it means.

Middal wrote: ↑ I did some more research and i think you're wrong. Not sure how you can be so confidently incorrect

Like other poster said, it seems it varies how other lenders will consider rental income (0 to 70% seems usual).

If the property is break even and a lender considers 50% rental income then my mortgage amount should only suffer by like 40 to 50k (10k reduction income a year times multiplier)

Unless I'm wrong I think TDS and GDS is all that matters and this will have an immaterial impact on that

Middal wrote: ↑ I did some more research and i think you're wrong. Not sure how you can be so confidently incorrect

Like other poster said, it seems it varies how other lenders will consider rental income (0 to 70% seems usual).

If the property is break even and a lender considers 50% rental income then my mortgage amount should only suffer by like 40 to 50k (10k reduction income a year times multiplier)

Unless I'm wrong I think TDS and GDS is all that matters and this will have an immaterial impact on that

Toukolou wrote: ↑ "What are the criteria for using rental income to qualify for a mortgage?
Since the CMHC is a Crown corporation regulated by the government, their rules set the expected standard for mortgage applications across the country. This means that as long as the homeowner’s circumstances meet the criteria and requirements outlined, most lenders will allow using rental income to qualify for a mortgage in Ontario. The requirements are as follows:

The owner must live on the property.
The property can only have two living units (e.g. the main home with a secondary suite or a duplex home).
The rental suite has been occupied for at least two years.
The suite meets all zoning requirements and regulations.
The suite has its own entrance and is self-contained.
The owner must have a strong credit history.

What does this mean for homeowners with separate rental properties?
Unfortunately, if you’re a homeowner who lives at your primary residence without tenants but has several rental properties giving you earnings, using rental income to qualify for a mortgage in Ontario is not permitted. To clarify, most big bank lenders and other more common lenders will not consider your rental income when looking at your mortgage application.

When it comes to using rental income to qualify for a mortgage in Onatrio, having more rental properties can actually hurt your chances of getting a reasonable mortgage rate. This is because lenders would like to secure their own interests; an applicant with multiple properties is taking on a lot of risks since rental income isn’t guaranteed and depends upon the tenancy being occupied all year long.

As a result, while the CHMCs regulations are great for homeowners living in a home with a rental suite that meets requirements, investment property owners renting their homes will find using rental income to qualify for a mortgage in Ontario much harder."

https://mortgagemaestro.ca/using-rental ... n-ontario/


This article is from 2021, btw, nothing new. Very easy to find many other sites corroborating this.


All of that aside, you are not breaking even, you are reporting a loss. Even if you were breaking even, it doesn't help to boost your income to help you qualify for a higher mortgage.

In any event, contact a few brokers and see what they say.

Bon chance.

rfduser123 wrote: ↑ This.

Just to add to my previous post, some lenders may take a % of your POSITIVE income into consideration, but in your case you have a net loss, so that will further reduce your qualified amount. The lenders need to assess that some of your income from employmemt need to be used to service that rental debt.

You seems to be a technical person. Build a model of your rental operation, project next 5 to 10 years, make some assumptions on income and inflation. Past 10 years RE market in Canada was not the norm, assume real appreciation at or below inflation, do you still want to hold on to it? You will reach your own conclusion.

Middal wrote: ↑ Selling now would be like buying bitcoin at 60k and selling for 30k.

For accounting purposes our income is around negative 7k to 9k a year (variable and most pmt is going to interest) not a big deal and at our tax brackets we recover almost 50%

The property will never be cash flow positive unless ...

Middal wrote: ↑ Selling now would be like buying bitcoin at 60k and selling for 30k.. the condo isn't worth what we paid and add 5% fees to sell we would lose a lot of money

Our real cash flow is around negative 10k to 12k a year, we're both fortunate enough to earn good incomes so this amount doesn't have a huge effect on us- we consider it like a long term saving/investment plan

For accounting purposes our income is around negative 7k to 9k a year (variable and most pmt is going to interest) not a big deal and at our tax brackets we recover almost 50%

The property will never be cash flow positive unless we extend amortization period or rents see another 20% increase (current tenant is from before rents jumped last yr). We knew that going on. I think once rates normalize, it will appreciate 20 to 30% over the next 15 years

In hindsight it wasn't the best decision but we can't opt out now

Toukolou wrote: ↑ Was the rental registered before Nov 15, 2018? If not, it isn't subject to the rent cap.

Middal wrote: ↑ I thought this was based on when the condo was built? We purchased it after 2018 but condo was built 2014 - does that mean we're not subject to the 2.5%? I'll look more into this but any info would be greatly appreciated

Middal wrote: ↑ I thought this was based on when the condo was built? We purchased it after 2018 but condo was built 2014 - does that mean we're not subject to the 2.5%? I'll look more into this but any info would be greatly appreciated