I would love to invest in Condos, but I don’t have enough money for a down payment. Can I use equity that I have built up in my home towards a down payment on a condo?
Absolutely! If you have enough equity in your home you can apply to refinance and pull out that equity. As a home owner, you are eligible to refinance your principle residence to a maximum of 80% of the value of your home.
As an example:
Home Value - $600,000
80% of the home value - $480,000
Remaining Balance on Mortgage - $250,000
Available Equity that can be refinanced - $230,000 (at 80% of the home value)
Peter Snow
Mortgage Development Manager
GTA East and Durham Regions
How does the refinancing process work and how can I use refinancing towards my future condo investments?
The Canadian Government allows home owners to refinance up to 80% of their home value when refinancing. To do this, the bank will send an appraiser to your home to assess the value. Once the value has been established and a credit application has been completed, the bank will authorize a new mortgage and they will advance you the money into the account of your choice. This money is yours to do as you wish, including investing in the purchase of an investment condo. If you require further mortgage financing to purchase the condo, keep in mind that this will be a separate mortgage and the bank will need to qualify you for this additional financing. To ensure you are able to qualify for both mortgages, please see your mortgage professional for advice on your specific situation.
Peter Snow
Mortgage Development Manager
GTA East and Durham Regions
What are the benefits of refinancing my home?
There are some benefits to refinancing your home, such as;
· Taking advantage of the current low interest rates on mortgages.
· Low mortgage rates used as an investment vehicle will help with your cash flow. This is because you are not paying as much money on interest versus the cash you receive from your investment property.
· With the right advice, you may be able to get your equity to work and grow faster than you could have by leaving it in your home.
· Another lender may be able to offer better mortgage solutions to fit your needs. Mortgage products are not all built equally and your mortgage professional can explain these differences to you.
· Refinancing allows you to protect your savings by leaving it intact and diversifying your portfolio of overall investments.
Peter Snow
Mortgage Development Manager
GTA East and Durham Regions
Can the bank hold a mortgage rate until the closing date? What if it is 3 or 4 years from now, such as when purchasing a new construction condo?
Banks have a certain ability to hold rates for predetermined amounts of time. At National Bank, we can hold a rate up to a maximum of one year. If a lender is holding a rate for longer than this, bear in mind that it will not be at today’s super low rates. The bank will provide a much higher rate of interest to ensure they are protected from any rate increases between now and the closing date. However, if you’ve already taken a rate that was locked in for 3 or 4 years, don’t think that you will be forced to take this rate upon closing. You are more than welcome to consult another lender when you are approaching the closing date for a better solution for you.
Peter Snow
Mortgage Development Manager
GTA East and Durham Regions