If you have been in the real estate industry for a while, then borrowing becomes second nature to you. The question is; when should you exactly borrow? Well, for starters, if you have sufficient income from extra sources, a secure salary or if you have managed to source for extra funds, you can boost your loan, especially if the market has indicated a significant drop.
1. The RRSP Option
You can use your Registered Retirement Savings Plan as down payment for your new investment, but of course, this depends on the mortgage loan provider. However, don’t worry even if you cannot be allowed to use your retirement plan to fund the down payment because you can still use the equity in your first home. You can borrow against the equity and have your money for the down payment, quite easily.
2. Insured Mortgage
Insurance is the surest way of getting mortgages and loans. Many lenders will provide investors with insured mortgages where the investor has to pay the insurance premiums. Thus, these kinds of loans are more expensive, but it is better to have an expensive loan than no loan at all. The insurance is the lender’s assurance that should you defect, they will still recover the money owed to them.
The insurance allocated to mortgage default is not a common premium as it is only paid when you come to a buying close. You can opt to pay the premium or attach it to the basic payment of your mortgage. You can discuss this option with your mortgage adviser if you are unsure about it.
3. Conventional Mortgage
This needs a down payment of not less than 20% and is usually provided based on either a variable interest or a fixed rate. Note that this option usually comes at a lower cost as it does not need to be insured on default basis. It can be in the form of the traditional 30 year mortgage or the 15-year one.
4. Mortgages and promissory notes
Which real estate agreement doesn’t have a promissory note? None, as when you go to buy a home, you will sign this note with a lender. It is just a promise that to retain the right of ownership of the home, you agree to be paying a certain amount of money. A promissory note will secure the interest of the lender in the property under sale. When you go to look for mortgages and loans, you will definitely have to sign this note.
5. Down Payment Option
A down payment allows you to weigh your options as far as the purchase price goes. Usually, the balance is fetched from a bank or alternative financial institution in the name of a mortgage. The down payment in total provides your new investment’s equity or your financial stake. The more money you have to put up as the deposit for your home, the friendlier the rates and the terms of the loan repayment will be.
It is advisable that an investor strictly stick to mortgages and loans options that work for him. Do not settle for an option that will overwhelm you. For example, consider all your financial obligations and take an investor mortgage that does not leave you desperate every month.
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