As the federal government does whatever it can to shake up Canada’s real estate landscape, investors are being forced to adapt and find different ways of making their strategies work. The lending space has been hit hard by new regulations and whereas two years ago an investor may have had 20 - 25 lenders to choose from for a new rental property, they now only have seven or eight. In the complex and often confusing modern industry, increasing numbers of Canadian investors are turning to mortgage brokers in an attempt to secure financing.
“It comes down to choice; every lender is not considered equal, the banks know that they control a lot of the cards in the rental markets, therefore they're pricing accordingly,” says Shawn Stillman, Director, Principal Broker at Sigmamortgage.ca. “Lenders such as TD and Scotiabank have added rate premiums to investment properties versus rates on owner occupied properties. For investors, having access to the options a broker can provide is vital.”
Before deciding on a mortgage broker to partner with, Stillman advises investors to conduct some thorough research. Working with a trusted and experienced broker is simply essential. “The mortgage brokering world is full of individuals who don’t have much experience and those who have years of it and are up to date with the rules,” Stillman says. “People shouldn’t assume that a broker knows what they’re talking about. In a lot cases they don’t, and the investor is going to be in for a nasty surprise down the road.”
In the current climate of financing woes, Stillman advises investors to consult a broker before finalizing the purchase of any rental property. In the past, investors assumed getting a mortgage on a rental property would be straight forward, but new rules are changing all of that. Investors who don’t confirm their exact payment schedule before making an offer could be in for a rude awakening.
Stillman gives the example of an investor buying his fourth rental property; a single family house. This individual had encountered no problems when securing financing for his three previous properties and felt confident enough to put in an offer without a financing condition. But this time things were different. “We had to work with a major bank to get the deal done in a hurry,” Stillman says. “Otherwise, he would have been looking at a non-prime lender and paying a percent and a half higher on his mortgage.”