In Canada, the cost of buying and maintaining a home seems to be constantly rising. With the price of a single-family home in a place like Vancouver or Toronto that is around $ 1 million or more, it’s no wonder the middle-class Canadian is having trouble saving even the 5% down payment required, not to mention the suggested 20%.
First-time homebuyers are often the consumers most affected by the rising cost of housing in Canada. This means that these buyers must look for alternative strategies to help them enter the real estate market. Mortgage help, or commonly known as a rental apartment, is a great way for first-time homebuyers to get the extra cash needed to purchase the home of their dreams. Let’s see how this help can ensure your momentum in the Canadian real estate market.
What is a Mortgage Help?
As mentioned above, a mortgage assistance is a rental suite whose income can be used to apply for a mortgage. The main purpose of a mortgage help is to help the consumer pay off their mortgage faster. However, it can also be used to help people who need a little more income to buy a home. When applying for your mortgage, you will need to provide 2 years of rental information to determine the average rental price in your area for secondary housing. You will then report the rental income with your own income and thus qualify more easily for a high mortgage.
In recent years, in order to be approved for a larger mortgage, buyers were allowed to report only 50% of their income from a secondary suite. This year, Canada Mortgage and Housing Corporation changed its rules and potential buyers can now claim 100% of their rental income when they apply for a mortgage.
Creating a secondary suite for rent
For a leased secondary suite to qualify for mortgage assistance, it must comply with a variety of rules and regulations. The unit should have its autonomy inside your house and include its own kitchen, bathroom, and separate entrance door. There must be adequate ventilation, be soundproofed and have a sufficient number of windows. Your house must also be zoned to allow a rental secondary suite. If your home and suite do not meet all the requirements, you will not be allowed to report the income you receive from the rental unit to be approved for a mortgage. In addition, not all cities or municipalities allow rental secondary suites. It is important that you do research in your area before making a final decision about using a secondary suite for the purpose of obtaining a mortgage.
Pros renting a secondary suite
There are two major benefits to using a secondary suite to rent as mortgage help and in general, outweigh the disadvantages. Here are the two main reasons a secondary suite could be exactly what you need to pay for the house of your dreams:
- You will be able to use the income generated for the approval of a higher mortgage. So, you could afford a bigger house in a more upscale area.
- You will be able to pay off your mortgage faster and eventually own your home.
Counters of renting a secondary suite
Managing the rental of a secondary suite in your home will not always be easy and as the owner, you will be responsible for all repairs, maintenance, and financial problems. Here are some of the disadvantages that you should consider if you plan to use this mortgage help:
- You are responsible for all repairs. If you have no idea how to handle the plumbing or an electrical problem, you will have to pay someone to do the work for you.
- If your tenant stops paying rent, you will have to deal with him.
- If you are approved for a loan based on receiving a specific amount generated by your suite and you are unable to find someone to rent your home, you could end up with serious financial problems.
Keep in mind that while mortgage help may be helpful, you should not go overboard financially. You must remain realistic about your financial situation. Taking a mortgage that is far too expensive would lead to serious money problems.