This might seem like part of a Dr. Suess rhyme but it is actually a legitimate and very pertinent question especially for first time home buyers. Read on to learn more about how a renter can help a renter be a home owner!
As a Grimsby mortgage broker, I see and feel the pain of “first-time” homebuyers. Not only are they faced with historically high real estate prices, but they now also have to contend with decades-high interest rates. The combination of high prices and high interest rates naturally lead to high payments which negatively affect affordability.
Is there another option?
When faced with this dilemma of lack of affordability, there are only a few options. Some are lucky enough to have family members that can assist them with a larger down payment, or by acting as a co-signer. Others will temper their expectations by moving outside of their preferred market chasing lower prices, which is getting more and more difficult, or simply waiting to save for a larger down payment or wait for that promotion to happen.
If only there was another option!
One that didn’t depend on a wealthy family member or the long-term prospect of getting a raise or saving additional tens of thousands of dollars. Well, what if this Grimsby mortgage broker told you there is AND shows you how to tap into the strong rental market and have a renter help you not only qualify for a mortgage but actually have them help pay your mortgage for you?
Please, tell me more!
This strategy is truly a win/win scenario for you and a potential renter! You get to purchase you’re home and they get an affordable rental unit with a great landlord.
Our lenders treat the prospective rental income for your unit as income that will go towards paying the mortgage, which will increase your purchasing power. This strategy will also work with mortgage insurers such as CMHC and Sagan, so you can purchase a home with as little as five percent down.
This strategy can be used for the purchase of a home with a separate “self-contained apartment” such as a basement apartment. The definition of self-contained is that it must have a separate entrance, kitchen, bathroom and bedroom. It will also work for duplexes, triplexes and up to fourplexes. Once you move past a fourplex it is considered to be a commercial mortgage by most lenders which is a whole different discussion.
Ultimately by renting out a unit in your home, you can afford a larger more expensive home. The tenant will pay you rent which will go towards your mortgage payment, helping you with cash flow or paying off your mortgage more quickly which is essentially money in your pocket down the road with increased equity.
Who else is this option good for?
In addition to being a good strategy for first time home buyers it is also a good strategy for retirees. Who can either add a rental unit to their existing home or relocate to another home that has an existing rental unit or units. This can increase affordability and potentially add to their retirement income. In my capacity of Grimsby mortgage broker, I have even seen the potential for retirees in some situations to utilize a reverse mortgage to fund the construction cost of adding a rental suite to their home. The income from the suite can initially be used to pay off the mortgage balance used for the construction costs and then after paying it off, it can go towards additional income.
Make sure to reach out to me for more information on how this strategy can help your situation. Give me a call at (905) 309-8799 today and we can see if a renter can help a renter be a home owner!
Mark