June 28, 2017 nkad3

Should Your Mortgage for an Income Property be Different than your Home Mortgage

A mortgage for income property can be different from the mortgage you have on your primary residence but it depends on personal circumstances and goals. For example, you may have a 5-year fixed mortgage on your home but because your goals are different for each property, so to would be your mortgage. Usually clients prefer to take more cautious mortgages on their own homes and tend to be more risk savvy when it comes to mortgage for income property. So, in the case of the income property, clients give more consideration to variable mortgages, where the interest rates can fluctuate throughout the term of the mortgage. Having said that, there is no right or wrong mortgage strategy if the decision is based on all the available information of your goals and circumstances.

Below is an example of how clients would consider to make their decision to take a mortgage for income property versus their primary residence:

Mortgage for income property:

  • What is the purpose of the property (Goal)?
  • What is your risk tolerance to rate fluctuations?
  • How long do you need to hold the property to meet your goal?
  • How does this timeline work with your personal circumstances?
  • Does your income property break even or create a surplus of cashflow?
  • If you need to sell the income property, will the mortgage yield high penalties (if any)?

Mortgage for primary Residence:

  • How long do you plan on staying in your home?
  • What does the next 3,5,10 years look like on a personal level?
  • Do you consider this property to be an investment as well as your home?
  • What is the maximum mortgage payment you can afford?
  • Does having an investment property affect this home directly or indirectly?

There are many other questions that you can ask yourself when if it comes to the mortgage for income property as well as your residence but the key is the consideration itself. We usually tell our clients to proceed with decisions based on their foreseeable futures. For some, the foreseeable future may be 5 or more years and for others, it may only be a year or two. Always remember that no matter how predictable you think your future may be, hindsight will always be clearer. So, it’s especially important to not make long term goals if you cannot confidently predict your upcoming years.

If you have any questions on mortgage for income property or would like to discuss your personal circumstances, please feel free to contact us today – 905.455.5005.

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