First Time Home Buyer Mortgages .ca
Non-Subject Documents!
So you own another property or two, and you're buying a new one. Great investment strategy!
In BC, if you already own rental properties (but they’re not the one you’re buying right now), you might be able to use the rental income from those properties to help qualify for a mortgage. This can be a big help in boosting your income and making you eligible for a larger mortgage. We will need a handful of documents for these other properties, or "non-subject" properties as we usually call them. The docs will range from mortgage statements, to property tax (with proof of payment) and possibly lease agreements.
What’s Non-Subject Rental Income?
Non-subject rental income is basically the money you make from renting out properties that you already own, but are not part of the new home you’re buying. For example, if you have a rental property or a basement suite in your current home, that income could be used in your mortgage application.
First Up - The Mortgage Statement
You'll get one of these annually, usually at the end of Dec or start of January. It will summarize the mortgage payments over the last year and tell you how much you paid to interest in principal, and it will list your current payment amount and interest rate as well.
This is VITAL for us for your qualification.
If your lender has a portal that you can login to - we also could really use a current snapshot of your statement as well. We can match up info from the annual statement to the portal snapshot. See the following example for an acceptable snapshot (as long as we have an annual statement as well)
Next - The Property Tax Statement
The property tax statement is something that comes out every May and must be paid for by July 1st of each year. Some mortgage lenders pay this for you and with others you are required to pay it yourself. Some people also choose to pay their own taxes in a lump sum each year, and just put the money away on their own each month.
Proof of payment for these is required either with a bank statement showing the paid amount, or a snapshot of the online portal showing the tax amount being paid.
Lastly, lease agreements & T1's
Lenders can use the rental income you make from other properties to help increase your total income when they’re calculating how much mortgage you can afford. This can work in your favor, especially if you’ve got a steady stream of rental income coming in.
Lease Agreements: This is an agreement drawn up between you and the tenant laying out the length of the tenancy, as well as the monthly amount you expect to review for rent.
Proof of Income: You’ll need to show your lender proof of rental income. This is usually via tax returns (T1's), or bank statements that show you’ve been getting regular rent payments.
How Much Income Counts: Lenders won’t consider all of your rental income. They’ll usually count around 50-80% of it, because they factor in potential vacancies or maintenance costs.
What Kind of Property: The type of rental property you have matters too. If you’re renting out a whole house or just a suite in your place, lenders might look at it differently.
Taxes: Your rental income should be reported on your tax returns. If you haven’t been reporting it, you might run into problems with your mortgage application. Be prepared to send your broker or advisor the most recent two FULL T1's (they need to include the rental schedule pictured above)
Steady Income: Lenders like to see that your rental income has been consistent. If you just started renting out the place, or if your rental income fluctuates a lot, it might be a little trickier to qualify. Some lenders will allow us to use an appraisers market rent report.
Market Rent: An appraiser can do up what is called a "market rent report" in which they look at listings for similar units around and do up an approx rental amount for the unit. These reports are usually an up front cost of $125-150
Using rental income from your other properties can be a helpful way to boost your eligibility for a mortgage. Just make sure your rental income is properly documented, and if you’re not sure about the process, chatting with a mortgage broker or lender can help clear things up.