Faith and Finance

mortgagelocator.ca Hi everybody. It’s Rowan Smith with the Mortgage Centre. I want to address Bank Montreal’s 2.99 percent offer that’s on the market and to explain some of the restrictions that people need to be aware of, some of the fine print. First off, yes, it’s one of the lowest rates historically ever offered, but it comes with some restrictions such as you can only have a 25 year amortization. Now, many people don’t think that this is a problem because they think I only want a 25 year amortization anyway and across a lot of Canada that is still absolutely the practice. In Vancouver, however, where prices are as high as they are, many people require the 30 year amortization or in some cases the 35 year to qualify for the home, not because their situation isn’t sufficient to pay for it but because the price is just so high and perhaps for tax efficient reasons or one reason or another they’re not having the full amount of their company income declared in their personal taxes. If you’re one of those people, a 25 year amortization can provide a serious problem for you getting approved for this product because you’ll have to show additional income on paper in order to qualify. Some of my other lenders still offer 30 or 35 year amortization even with a comparable rate. Bank of Montreal has also got prepayment privileges severely limited. For example, the standard of the industry is what we call 20/20. You can prepay up to 20 percent of the original mortgage amount and …
Video Rating: 5 / 5

Question by homer simpson: Cash out refinancing for another mortgage downpayment?
I want to do a cash out refinance on my mortgage in order to get a down payment for an income property. I have plenty of equity in my current mortgage. Where do I begin?
Do I do the refinance first and hope my bid on the income property is accepted? Do I put in a bid on the house first? Is there a way to roll some things together to avoid paying closing costs on the refinance and the new property purchase?
Is this just a bad idea all together?

Best answer:

Answer by Noneya
The only way to do this is to do the cash out refinance first. This allows you to season the down payment for the purchase and allows the lender to accurately calculate your debt to income ratio because the new mortgage payment should be reporting by the time you apply for the purchase.
You should also know that you will need to qualify for both mortgages without including the anticipated rental income when you apply for the investment property loan.

Know better? Leave your own answer in the comments!