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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: ojoao on January 24, 2016, 01:23:15 PM

Title: Looking for some advice/feedback - Toronto Condo
Post by: ojoao on January 24, 2016, 01:23:15 PM
Hello MMM community,

I've been following the blog for a few of years, but have been adhering to the group's philosophy of saving and investing for much longer. Today, I'm coming to the group seeking for advice/feedback. I'm a PhD student in Toronto looking to buy a condo to live in while I study and rent out after graduation. The only problem is that I already bought a house in Hamilton when I was going to school there, and I'm currently renting it out. I currently have a tax free savings account with 40k in it, which would normally be fine as a down payment but I already have the house in Hamilton which is making things difficult. Does anyone have experience on purchasing a second property in Canada before the first one is paid off?

So far I think my only option is to continue saving and buy the condo for cash without a mortgage.

Title: Re: Looking for some advice/feedback - Toronto Condo
Post by: ashfo on January 27, 2016, 09:41:05 AM
How long have you been renting out the Hamilton home?  If you have rental history of two years on your income tax, you should be able to use that as additional income so that you can qualify for a higher mortgage value for a condo. 

Another option, if you have enough equity in the Hamilton home, but probably still need the rental income history, is to refinance that home into a investment mortgage. 

Talk to a mortgage broker to see what options are available to you.  You shouldn't have to buy a place in cash to have a second property.
Title: Re: Looking for some advice/feedback - Toronto Condo
Post by: TrMama on January 27, 2016, 10:50:11 AM
How is the house making it difficult for you to get a 2nd mortgage? Having 2 financed properties isn't a fundamentally difficult thing here.
Title: Re: Looking for some advice/feedback - Toronto Condo
Post by: Le Poisson on January 29, 2016, 07:14:13 AM
I second the advice to talk to a mortgage broker. They seem very adept at working through difficult arrangements. Many folks carry multiple mortgages, cascading the equity in one property against the next. From my research (not experience) it depends how much equity and liability you are carrying as to whether this approach will work for you.
Title: Re: Looking for some advice/feedback - Toronto Condo
Post by: Freedomin5 on February 07, 2016, 09:09:39 AM
I'm also in the GTA and am working through a similar problem right now. In addition to the points raised by the previous posters, the issue that I've come across is that the banks look at your income when determining mortgage amount, because they need to know that you will be able to cover both mortgages even if your rental property is vacant. As a PhD student, will your salary/grant/income source be enough to cover both mortgages in any given month, in the worst case scenario where you are not receiving a rental income?

We've rented our condo out for four years, with only a one month vacancy in that period. Now that we're considering purchasing a second rental condo, the banks worry that we can't cover both mortgages, especially because our incomes are still only mediocre. Our solid four-year rental history doesn't seem to play much of a role (though obviously it's not hurting the mortgage application). So banks tend to offer a smaller mortgage. One way to work around it is to apply for a line of credit against your first property - in our case, we've built up enough equity (first mortgage is almost paid off) to qualify for a pretty hefty line of credit. The interest rate is slightly higher than a mortgage, but still pretty decent.

From my experience, you don't have to pay all cash for a second property. You do have to get a bit more creative with financing. Talking to the bank that holds your mortgage will likely be helpful since they can run numbers for you and tell you how much of a mortgage you qualify for. I've found it is also helpful to build a relationship with a particular branch/branch manager.

Please note that I am by no means an expert on this. I'm just sharing my own experience as a Torontonian with a mortgage and mediocre income trying to buy a second condo in TO. Would love to hear how it all turns out for you.
Title: Re: Looking for some advice/feedback - Toronto Condo
Post by: FI40 on February 08, 2016, 02:20:32 PM
Why not rent? In downtown Toronto, it's likely the cheaper option. Put the numbers into the NYT rent vs. buy calculator ( In my case, under most reasonable assumptions it comes out in favour of renting.