An investment property can be a great way to make some extra income, and securing a mortgage for one does not have to be a challenge if you have the right information ahead of time.
What exactly is an investment property? It is a property that you will rent out at least partially, and it could have multiple separate units. The exact division of the property you would like to purchase will impact the the process for securing the mortgage.
The number of units in the property will determine the zoning
Before you have settled on a particular investment property, it’s a good idea to consider how many units you want in your ideal property. If a property has one to four units, it will be zoned as residential. A residential mortgage for this type of property will be similar to the mortgage that you have for your home–it could be only slightly more difficult to attain.
Properties with four or more units, however, are instead zoned as commercial, which will have considerably higher qualification criteria and higher interest rates.
Whether or not you will live in the building will affect the down payment
If you are looking to purchase an investment property with more than one unit, you may consider occupying one of the units yourself. This is of course possible, but it will have an affect on the size of the down payment that you will need.
If you will live in the building, it will be considered “owner-occupied” and you will have to actually put down a smaller down payment. A property with one to two units, for example, could require a 5% down payment if you will live there or a 20% down payment if you will not. Similarly, a property with three to four units that is owner-occupied could require a 10% down payment, whereas a non-owner occupied would again require 20%.
There are some important decisions to make when it comes to investment property mortgages, and Rakhi Madan Mortgage Agent can help you through every step. Contact me to learn more and get started.
