Purchasing a home with a basement rental suite can be a great way to own a higher priced home with the benefit of having part of the mortgage paid for by your tenant. However, lenders take rental income into account in a variety of ways. Banks tend to be more conservative meaning you’ll qualify for a smaller mortgage, while credit unions are familiar with the local rental market so you’ll generally qualify for a larger mortgage. This is why using a Mortgage Consultant is so important. Take this example, based on an annual income of $115,000:
NO Suite
Maximum purchase price: $800,000
20% downpayment: $200,000
Maximum mortgage : $640,000
Standard condo fees & property tax
Home WITH Rental Suite
1) BANK OPTION
Rental income of $1,600/month
Standard property tax
Maximum purchase price $1,000,000
20% Downpayment: $200,000
Maximum mortgage amount $800,000.
2) CREDIT UNION OPTION
Suite rental income of $1,600/month
Standard property tax
Maximum Purchase price $1,350,000
22% Downpayment: $300,000
Maximum mortgage amount $1,050,00
(no stress test; rental income is treated more favorably in application)
