With a minimum 20% down payment purchasers have many options available to them when buying investment/rental property.

What is the cost for Mortgage Insurance?
With 20% down the mortgage is conventional and no mortgage insurance is required.

Underwriting Fee: There is no underwriting fee for conventional mortgages.

Mortgage Rates: Discounted mortgage rates

Net Worth
The requirement for a minimum net worth varies from lending institution to lending institution. Most lending institutions do not have a minimum net worth, however some require that you have a minimum $100,000 net worth per rental property.

Debt Coverage Ratio
The requirement for debt coverage ratio varies from lending institution to lending institution.  Some institutions will use rental off set for qualifying purposes. While other lending institutions will use 1.10% debt coverage ratio.

1.10% debt coverage ratio is arrived at by dividing the Net Operating Income by the Debt Service.  (Please see Debt Coverage Worksheet below.) 

20% Down Mortgage (1.10% Debt Coverage Ratio) Example:

• Purchase price of $281,250
• Mortgage of $225,000 at 4.4%
• $1232 P&I
• Monthly rent: $2000

Debt Coverage Ratio Worksheet:

Potential Gross Income (Monthly Rent x 12):	(a)	$ 24,000
Less: Vacancy and Bad Debt Allowance (5%):	(b)	$ -1,200
Effective Gross Annual Income:	(a) + (b) = (c)	$ 22,800
Taxe:		$2,400
Maintenance and Repairs (5%:		$1,200
Management Expenses (5%):		$1,200
Total Annual Operating Incom:	(d)	$4,800
Net Annual Operating Incom:	(c) - (d) = (e)	$18,000
Annual Debt Service (Annual P & I:	(f)	$14,794
Debt Coverage Ratio (Minimum of 1.10): (Divide net annual operating income by the annual debt service)	(e)/(f) = (g)	1.21

Download Worksheets:

• Rental Property Cash Flow Analysis (1.10% Excel Worksheet 1)
• Property Income and Expense Analysis of all Properties Owned (1.10% Excel Worksheet 2)

20% Down Mortgage (Rental Offset) Example:
Rental offset is when a lending institution uses 70% of the rental income and offsets it against the P.I.T.  Only the shortfall will be included in the Debt Ratio.  If there is a rental surplus this will be added to the client’s income.  Assume a rental property in Calgary with P.I.T. of $1,432 and rental income of $2,000. We will take 70% of the $2000 income ($1,400) and deduct that from P.I.T. ($1,432). We will only add the $32 shortfall to the Debt Ratio.

Download Rental Offset Worksheet:

• Rental Income and Expense Breakdown (Rental Offset Excel Worksheet)

MyMortgage.ca
Online Application

	Investment Mortgages
»	20% Down Mortgage
»	20% Down Line of Credit
»	5% Down Mortgage (Insured)
»	5% Down Second Home Mortgage
»	5% Down Vacation Home Mortgage
»	Debt Coverage Worksheets (Will you Qualify?)