investment property financing

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INVESTMENT PROPERTY FINANCINGMAKE THE BANKS SAY “YES”!

A little about Geoff Lee…

√ Co founder and Director of the Imani Orphan Care Foundation● www.imaniorphancare.com

√ Over 22 years of real estate experience and investment

√ Member of…● Better Business Bureau● Chamber of Commerce● Mortgage Brokers Association of British

Columbia● Canadian Association of Accredited Mortgage

Professionals

√ Mortgage educator/key note speaker  for… ● Wealthy Investment Network ● Business Network International

√ Regularly sourced for mortgage insights by the … ● Vancouver Sun ● Mortgage Broker News

√ Ranked amongst the top 3% mortgage brokers in Canada by CMP magazine

√ Finalist in 2014 CMP Canadian Mortgage Awards for Best Customer Service from an independent office

How do you make the Banks say “YES”?

Debt Servicing

It is all about Debt Servicing

How do you make the Banks say “YES”?

Debt Servicing

What is Debt Servicing?• Income Earned versus Debt Owing

• Gross Debt Servicing – GDS

• Total Debt Servicing – TDS

• Lender’s guidelines

What affects Debt Servicing?

Income earnedIncome qualified – “salaried”

• Rate per hour x weekly hours worked x 2 x payroll periods

• Two year average of Notices of Assessment (NOAs)

What affects Debt Servicing?

Income earnedBusiness for Self – “self employed”

• Two year NOA average with gross up

• Two year NOA average adding back expenses

• Financial Statements

• T1 Generals – “Statement of Business Activities”

What affects Debt Servicing?

Income earnedBusiness for Self – “self employed”

• Stated Income

• What is stated income?

• What do Lenders look for?

• Amount of time self employed

• Credit score

• Repayment history

• Amount of debt owing

• Reasonability

What affects Debt Servicing?

Income earnedOther income Lenders will consider…

• Universal Tax Benefit• 6 years old

• Canada Child Tax Credit• 18 years old

• Parental/Spousal Support• Cannot be more than 30% of income

• Pension/Disability

What affects Debt Servicing?

Debt Payment and Household ExpensesEach Lender may calculate debt differently.

• Secured Lines of Credit

• Unsecured Lines of Credit

• Credit Cards

• Personal and Student Loans

• Business Debt versus Personal Debt reporting

What affects Debt Servicing?

Properties OwnedUnderstanding Lender’s guidelines – “Non-

subject” and “Subject” properties…• Add Backs

• Add 50 – 100% back to gross income

• Offsets

• Reduce up to 80% of rental expenses and add the balance back to gross income

What affects Debt Servicing?

Properties OwnedUnderstanding Lender’s guidelines – “Non-subject” and

“Subject” properties…• Debt Calculation Ratio calculators – DCR

• Rent + Principle and Interest + Strata + Vacancy + Insurance + Property Management

• Ratios between 1.1% - 2.2%

• Add surplus or minus shortfall

• Wash out “Non-subject” and “Subject” property debts

• Net Rent Calculators• Rent – Principle and Interest – Taxes – Strata

What affects Debt Servicing?

Properties OwnedUnderstanding Lender’s guidelines – “Non-

subject” and “Subject” properties…• T1 Generals – “Statement of Rental Activities”

• Up to 2 years

• Add surplus or minus shortfall

• Take out “Non-subject” property debts

What affects Debt Servicing?

Properties OwnedIMPORTANT NOTE…

• What is conserved residential versus commercial?• How many “doors” in the purchase property?

• How many investment properties in existing portfolio?

• Lender’s guidelines

What affects Debt Servicing?

Down PaymentHow much do I have to put down?

Where can it come from?• Savings

• Home Equity – “Secured Lines of Credit”

• Joint Ventures

• Private Loans

• Vendor Take Back

• Gifted

What affects Debt Servicing?

Amortization……is the amount of time it will take one to pay off the mortgage

based on the contract rate…• 25 years - Monoline Lenders

• 30 years - Federally regulated Lenders

- Monoline Lenders• Insurance premium paid

• 35 years - Provincially regulated Lenders

• 40 years - Provincially regulated Lenders• Insurance premium paid

What affects Debt Servicing?

Monthly Personal Income 5000

Debt Services Limit (40%) 2000

Personal

Mortgage Payment or Rent 1200

Property Tax and Heat 200

Debt Payments 500

Total Monthly Payments 1900

Portfolio

Monthly Rental Income 4000

Bank Offset (80%) 3200

Total Mortgage Payments 2400

Surplus or Deficit +800

= $2800

The Bank Says “No”!

What affects Debt Servicing?

Personal

Mortgage Payment or Rent 1200

Property Tax and Heat 200

Debt Payments 500

Total Monthly Payments 1900

Portfolio

Monthly Rental Income 4000

Bank Add back (50%) 2000

Total Mortgage Payments 2400

Surplus or Deficit 400

= $2800

Monthly Personal Income 5000

Debt Services Limit (40%) 2000

Use Professionals with Investment Experience

Build YOUR team of experts• Realtor• Accountant/Notary• Mentor(s)• Property Manager• Mortgage Broker

• “NO” does not always mean “NO”!

Never Forget and Always Remember

• Investment property financing• Rate and Insurance premiums may apply• There is ALWAYS a Lender• Interest paid on an “Investment Vehicle”• Know your long term investment goals• Purchasing in a “holding company”• Its all about the CASH FLOW!

The will to succeed is important but what’s more important is the will to prepare…

Bobby Knight

Get in touch with us….

www.geoffleemortgage.comTwitter: @geoffleecaLinked In: http://ca.linkedin.com/in/geoffleemortgage/Email: Geoff@geoffleemortgage.comPhone: 1.778.552.3489

If you have any questions please call me at 778.552.3489 or email me at geoff@geoffleemortgage.com.

“We specialize in getting you the fastest “YES” at the SHARPEST RATE… GUARANTEED!”

- Geoff Lee