How Much Mortgage Can I Afford In Canada?

If you’re currently looking around at real estate and want to start getting the ball rolling in the mortgage application process, you’re probably wondering, “How much mortgage can I afford?” If you already have a mortgage and are wanting to learn how to get a second mortgage, then at least you’ll have a broad idea of how the process works. For those that are completely puzzled about how the entire mortgage process works, it’s recommended to consult with Mortgage Assist. Their team of dedicated staff will provide you details on mortgage rates, the best route to owning a home with a credit score that isn’t perfect, and many other topics surrounding mortgages. The mortgage assist program has been proven to be beneficial for many people that want to secure a mortgage even though they think they might not qualify.

There are people out there wondering how to get 2 mortgages or are even working on their 3rd mortgage. Getting a second property mortgage is entirely feasible because there isn’t a certain limit to how many mortgages that someone can get in Canada. If you’re able to make the monthly payments and successfully meet all of the criteria discussed by the lender, then there shouldn’t be a problem with that.

If you’ve just finished buying your second home in Canada and are starting to visit 3rd mortgage lenders to purchase more homes, you should keep in mind that it gets more and more difficult once you own higher than four different properties. Some people are using rental income to qualify for a mortgage in Canada, and through that method, they are able to increase their portfolio.

There are a few things you need to know if you’re wanting to learn about being approved for multiple properties.

What’s The Most Important Factor In The Number Of Mortgages Someone Can Have?

Many people are curious to know the number of mortgages you can have in Canada and elsewhere. Property investors are especially curious about it. The real estate industry is a lucrative one that can bring much wealth to people that know the ins and outs of it. The Canada Mortgage and Housing Corporation stated that about 15% of the new mortgages there were applied for in 2016 and 2017 were for secondary homes.

Sometimes mortgage lenders see people applying for numerous mortgages as being risky, and that’s why there is such a strict verification process in order to be approved for them.

Why do they think that?

When someone has multiple mortgages, issues in making the monthly payments can arise a lot easier than if they are only having to cover just one. The risk factor goes up even more if the rental housing is all within the same area. You might be wondering why there would be an issue just because they’re in the same region. It’s mainly because when the real estate market isn’t hot, then that entire region could be affected, and that means all of your rentals could potentially be affected by it.

In addition to that, the current issues with COVID-19 have created an onslaught of issues. not only in real estate but in many other industries, as well. People have been defaulting on rent payments due to not being able to even go to work and afford the payments in the first place. This has a chain effect because then the landlord won’t be able to pay off the mortgage on the rental property, and that could lower their credit score.

How Do You Get Numerous Mortgages And What To Expect?

Every lender you visit might have different criteria for approving the number of mortgages you’re able to qualify for. Because you’ve already been through the mortgage application process once, you should have a decent idea of what’s involved in it. Figure out exactly what you need for the second mortgage, and then start researching the different lenders out there. Begin setting up appointments with lenders and ask them any questions you’ve written down throughout your research. If you’re only wanting to get a second mortgage for another home to live in, then that’s a bit different than trying to get a mortgage for a property you’ll be renting out.

Getting another mortgage will be close to the same process as the one you went through when you got the mortgage for the first home. A lender basically wants to see that you have a stable income flow so that there isn’t a huge risk involved in lending you money. You’ll have to meet certain criteria:

Your Income Will Need To Be Verified

When you purchase a home, the financial institution you’re wanting to borrow from wants to know that their risk in lending to you isn’t too extreme. To figure out the risk involved, they’ll want to take a look at documentation regarding your tax returns, assets, liabilities, and income.

If you have other investment properties that you’re collecting rental income from, then you should also provide documentation of that, as well.

You’ll want to get used to keeping an organized file of all of the pay stubs that you receive throughout the year. If you’re self-employed, you’ll typically need the Notices of Assessment from the last three years.

Sometimes you’ll also be required to supply your heating bills and property tax bills

Mortgage Insurance

There are a few things that are taken into consideration when it comes to if you’ll need mortgage insurance. How the second property will be used is one of these things, and the other is going to depend on how sizable the down payment will be.

Credit Report

Your credit report will always be analyzed by a mortgage lender when deciding to approve you for a mortgage or not. If your credit score is high and reflects your ability to make monthly payments on time every month, then a lender is going to be able to have higher trust that you’ll be able to make the monthly mortgage payments.

Intent Of The Property

The intent of the property is a big thing when a lender is reviewing your mortgage application. If you’re wanting to purchase a property that’s off the grid and barely accessible for half the year, then that could be an issue. If the property is in a flooded area that could pose a threat to the structural integrity of a home, you can see this would raise a red flag for a lender. If you have any other rental properties, the lender might ask how they are doing. If you have three rentals sitting vacant, then that could be another red flag.

For those that have rental income from rental properties, one thing you should keep a note of is that only 50% of the rental income will count when you’re using it in the application for another mortgage.

Can You Get Multiple Mortgages From Private Lenders?

Even though there are some strict requirements for getting approval for multiple mortgages it is still very possible for many people. Sometimes people involved in the real estate industry decided to go with a private lender instead of a traditional financial institution due to some of the deals they can get. This is even more evident in people that are aiming for many mortgages at a time.

What’s The Benefit Of Private Lenders?

Private lenders do business a little bit differently than common financial institutions. They know the real estate industry and know that a lot of decisions in that industry require a certain amount of risk. This risk isn’t something that a traditional financial institution might be comfortable with. Private lenders view the negotiations a little bit differently, as well.

There are a couple of factors why some people would like to go with a private lender:

  • No verification of your income is required.
  • The terms on some of the financial products will be shorter.
  • You can use your current home as collateral.
  • The approval process is pretty quick.
  • You won’t have to deal with as much paperwork.
  • The private lenders are genuinely interested in how your secondary properties do.

Even though there are a number of advantages with a private lender, the trade-off is that you might be subject to higher interest rates.

Lending rules have become a little stricter over the past decade. In addition, housing prices have continued to rise higher and higher. Many people like to purchase multiple rental homes so that their kids can live in them while they attend university or other things.

The average home in Canada has doubled in price within the past ten years alone. The price of rent for housing has also increased in big cities such as Toronto. For just a bachelor-style apartment, you’ll be paying nearly $1,100 a month.

Stress Test For Investing In second Mortgages In Canada

The government of Canada introduced a stress test for borrowers. This test states that a borrower needs to be able to afford a mortgage rate of 5.34%, or just at the mortgage lender’s rate with an additional 2%, whatever one is higher. The rate that you finally get with a lender might be lower than this rate, but that is the criteria that you need to pass in order to get a mortgage.

If you have an income of around $200,000 a year and don’t have any other outstanding debts, you could be loaned up to $800,000. But for those that have an income of $150,000 a year, the ratios regarding the debt would be considered to be too high. If you were at that income level and desired to have some rental properties, a larger down payment would be required or you would just have to look around for a property that’s less in price.

Because there are so many additional costs included in a second mortgage, some financial advisors state that people can pay it off a bit faster if they use their tax refund on it. Some people’s priorities are to get rid of the debt on their initial mortgage first before focusing on the second one.

When you’re looking into purchasing an investment property, you’ll need to carefully design a financial plan that will include all of the costs involved in the new property. You’ll need to take into account all of the insurance, heat, hydro, interest, and repair payments that will be incurred throughout the life of the investment. It’s best not to look at a real estate like it’s a short-term thing. An investment property is typically a long-term investment that will pay itself off as time progresses.


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