Mortgages For Rental Properties
ByAs a follow up to my previous blogs, Rob Carrick of the Report on Business in today’s Globe and Mail has an excellent article on Mortgages, fixed or Variable. The article goes into of the pros and cons of fixed rate v/s variable, specifically a 10 year fixed rate to hedge against future inflation and as a result higher interest rates.
As I have already discussed the difference between the variable and fixed I won’t discuss this at any length, other than to say it all depends on your individual situation and your tolerance for risk. However, let us look at it from a small investor situation and are you looking to buy, or refinance a rental house or multifamily duplex or triplex, a unit that will qualify for a residential mortgage. If you are working on a long term plan for the property, a 10 year mortgage may be something you should consider. As an investment property you will be able to write off part of or the entire interest cost, but the main reason should be that you can lock in at a historically low rate ( 5% to 6% ) and know your mortgage costs for that term.
You should then be able to determine your cash flow fairly accurately for the next 10 years.
Other costs will be more difficult to determine, however, electrical ( especially ) water and sewer, natural gas and city taxes are all going up, we just do not know by what percentage. Increases allowed by the Tenant Act will probably not cover the increases. Therefore, knowing your mortgage costs may indeed help you make the decission to buy that certain property that you are interested in or to pass.
Check out the current Centum rates on my Web Page courtesy of our Mortgage Manager Mike Jones.
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