How A Common Mortgage Myth is Costing You Money

There is a pervasive myth in Canada that you can only purchase your first home at a 5% down payment.  This misunderstanding of the mortgage rules may be preventing you from investment opportunities.  The rule actually says that you can only buy a home that you are going to move in to at 5% down.  The kicker is that there is no limit as to how many times you can do this.  This is known as house-hacking.

For example, you can purchase an owner-occupied duplex at 5%.  The rental income from the suite may also be used to qualify for a higher mortgage amount.  Now, let’s fast-forward several years.  If you’re smart, you’ve taken the rental income and saved it for a down payment on your next property.  If you move into that property, you can do so with…….a 5% down payment.  While you’re at it, why not move into an owner-occupied duplex at 5%?  Or an owner-occupied triplex or fourplex at 10% down?

One significant barrier to building a rental portfolio is saving up the 20% down payment for a rental property.  Instead, you should strategically use the 5% down owner-occupied rule to acquire more properties at a faster pace.  This will help to accelerate your retirement plans, and set you up for a prosperous future. 

-Mike Schroeder, Mortgage Professional