Bump up You Mortgage Financing Without Bank Approval!

Many of us would like to purchase a rental property or two, however with the minimum down payment for an investment property now 20%, investors are stuck with having to come up with a large down payment

For example, you would like to make an offer on a property that is listed for $250,000.  If you pay full price, and want to avoid CMHC insurance, you will need a 20% down payment of $50,000….not exactly chump change.

However, your realtor has informed you that the vendor is motivated and will likely take $230,000.  Great news!!  However, with a 20% down payment, you would need $46,000….really not much of a difference!

What if I said there was a way to pay $230,000 and only put up $30,000 (12%) without paying the CMHC insurance fee?....Here is how to do this:

Offer the vendor full price (that’s right…FULL PRICE), however ask for $20,000 cash back at closing.  You are essentially going to pay the vendor the $230,000 that was expected, without having to outlay the full $50,000

Yes, you will need to initially put up the $50,000 down payment for the offer, but after your $20,000 cash back at closing, you will be left with only $30,000 out of your own pocket.   Now you can either take that $20,000 and put it back into the mortgage or you can keep it and treat it as an ‘extra’ loan at the going bank rate….much lower than a line of credit!

For those visual learners, here is a chart for reference:

	$250,000 offer	$230,000 offer	$250,000 offer with $20,000 cash back
down payment	$50,000	$46,000	$50,000 - $20,000 cash back = $30,000
mortgage amount	$200,000	$184,000	$200,000
Loan-to-Value	80%	80%	13%
CMHC fee	0	0	0

 Thoughts?