I’m excited to announce a new mortgage product that’s set to be a game-changer for homeowners. If you’re looking to buy a property and plan to add an income suite, you can now use future rental income to qualify for a larger mortgage! This opens up more possibilities for your home purchase and investment strategy.
Let’s dive into how this works with an example:
Scenario 1: Standard Mortgage Without Income Suite
Let’s say the applicant earns $100,000 per year and has minimal debt. Based on their income alone, they would qualify for the following:
- Purchase Price: $420,000
- Minimum Down Payment: $21,000
- Mortgage Insurance: $15,960
- Total Mortgage Amount: $414,960
- Approximate Monthly Payment: $2,305 (based on a 25-year amortization)
This is a straightforward case, where the mortgage amount is calculated based solely on the applicant’s income.
Scenario 2: Adding an Income Suite with Future Rental Income
Now, imagine this same applicant is interested in a home that needs some renovations, including the creation of a legal rental suite. The rental suite must have a separate entrance, kitchen and bathroom. Here’s where the magic of this new mortgage product comes in!
Using a Purchase Plus Improvements mortgage, we can factor in the future rental income from the suite, allowing the applicant to qualify for a larger mortgage. Let’s assume they plan to rent the suite for $1,500 per month.
Here’s what the scenario looks like with the income suite:
- Completed Property Value: $570,000
- Purchase Price: $500,000
- Renovation Costs: $70,000
- Minimum Down Payment (based on completed value): $32,000
- Mortgage Insurance: $21,520
- Total Mortgage Amount: $559,520
- Approximate Monthly Payment: $3,110 (based on a 25-year amortization)
By using future rental income to help qualify for the mortgage, the applicant is now able to purchase a higher-valued home, complete with an income suite that can provide extra cash flow.
How It Works
Once the mortgage is approved, here’s how the process will unfold:
- Purchase Closes: The lender provides the funds to cover the home purchase. At this point, the full purchase amount is paid to the seller.
- Holdback for Renovations: The $70,000 required for renovations is held back by the lawyer. This money will be released once the renovation is complete, and an inspector confirms that the legal suite has been successfully built.
- Releasing Funds: Once the suite is completed and inspected, the applicant receives the renovation funds, which are then rolled into the mortgage. In some cases, we can even arrange up to three draws during the renovation process as construction milestones are met.
Benefits of This Product
- Maximize Your Mortgage Potential: By using future rental income, you can qualify for a larger mortgage, allowing you to buy a more valuable property and create additional income streams.
- Build Wealth with an Income Suite: Renting out al suite can not only help pay down your mortgage faster but also provide long-term financial security through steady rental income.
- Flexible Renovation Financing: With a Purchase Plus Improvements mortgage, you don’t need to secure separate financing for your renovations—the costs are built into the mortgage, reducing financial strain.
Is This Right for You?
If you’ve been thinking about adding an income suite or purchasing a property that needs some renovations, this new mortgage product could be the perfect solution. Not only does it open up more buying potential, but it also sets you up for future financial gains through rental income.
Ready to explore your options? Let’s chat and see how this exciting product can work for you!
Click here to learn more about the Purchase Plus Improvements process!
Hi, I’m Jill, your mortgage pro. I am here to make the world of mortgages less confusing so you can feel confident in your financial decisions. Through my blog, I aim to provide you with the knowledge and guidance you need to make informed decisions. Your financial peace of mind is my top priority.
