Financing investment property in an agrarian economy like Canada presents its own set of challenges in addition to the regular ones. To deal with them, the first step is to understand what investment property means. A person who used to be called a landlord was roughly the same functionary as a real estate investor. He or she owned the establishment that was rented or leased out and the lease rent collected on these lodgings was their income. This same asset which they owned back then is called investment property now. This practice is also in vogue and is carried out on a much larger scale in the present times. Since it has low involvement after the deed is obtained, many choose this as a source of income after retirement. However, a considerable amount of research has to be put in to obtain the deed, so to say, to purchase the piece of property. For this reason, this asset is not merely a physical asset, but is considered an investment.
Financing investment property -- whether it is for individual, commercial usage or mortgage homes -- involves a lot of research on part of the buyer. This is because every proposal has so many funding schemes. Some of these are bridge loans and commercial mortgages. As the term of the funding scheme increases, the number of parameters of evaluation of risk in giving credit to the individual also increases. For someone who is being extended reduction financing which is a short-term lending scheme, much evaluation is not required. This scheme cannot be extended beyond 2 years and the minimum period of repayment is 1 month. However, home loans and commercial mortgages delve into the payment history and financial delinquencies of an applicant, as these have a longer term for repayment. The amount promised is also much larger, for which reason lending organizations prefer to have some form of security or collateral for extending this form of credit.
In Canada, for financing investment property, the best deal for real estate can be found by doing one's financial planning right. In addition to that, an analysis of one's credit history will be helpful in assessing the options facing the applicant. The first step is to get the credit report from the credit bureau and get it analyzed by a professional. Upon assessment and satisfactory report, a real estate investor can go about looking for the best deals. Some points to be remembered are as follows:
A larger down payment leads to lower interest rates and fewer, smaller consequent installments. Mortgage insurance does not cover investment properties, so it is imminent for a person to avoid risk. In many cases an applicant may be downright refused a loan or mortgage refinance if his or her proposed down payment is not large enough. The only alternative in such an event is a second mortgage, which is rarely offered at competitive rates.
Having a healthy credit score, debt-to-income ratio and loan-to-value ratio will make one a strong borrower - someone who the lender can repose trust on. In case of a credit score lower than 740, the applicant may be asked to pay for discount points upfront at the point of closing in to prevent the interest rate from creeping up. Also, one has to beware of floating interest rates; flat rates are better. Lenders now request reserves if there are any vacancies in multiple rental properties.
Lastly, it is a fact that larger firms and international banks are more rigid and unapproachable in the rates they charge, so it is worthwhile to explore the options offered by smaller banks.
