Buying a Rental Property When Living at Home: Qualifying for a Higher Home Purchase Price
For many people their first home purchase is a primary residence, but not always. In this article we’ll look at how to maximum your home purchase price when buying a rental property when still living at home.
Living at Home
If you live in a pricey real estate market like Toronto or Vancouver, you may want to buy your own primary residence, but you simply may not be able to afford to. If you still want to invest in the real estate market, but don’t feel like moving 2 hours out of town, you might consider buying a rental property in a more affordable real estate market.
Many lenders are okay with you not owning your primary residence when buying a rental property. You’ll want to double check to be on the safe side though, as some may not be okay with it.
Once you find a lender who is, next you’ll want to understand how renting impacts your mortgage application.
If you don’t live at home and instead are renting a place, there isn’t much wiggle room. Pretty much all mortgage lenders will want you to factor in the monthly rent that you’re paying as a liability. If you’re paying $2,000 a month in rent, it will be like having a mortgage with a $2,000 monthly payment. This can greatly impact your maximum home purchase price, especially if you’re buying on your own. However, if you’re still living at home, that’s when you have some extra flexibility.
If you live at home rent free like a lot of adult children, you’ll usually still have to factor in a monthly amount for living expenses. Although the amount that you’re required to factor in largely depends on the lender.
Many lenders want you to factor in $1,000 a month for living expenses when living at home. However, some lenders will let you factor in a lesser amount. Some lenders are okay with only including $600 a month. Others, let you factor in an amount depending on where you live. For example, if you live in a more expensive place like Toronto, you’ll need to factor in a higher amount than a more affordable place like Windsor or Sudbury.
How the Canadian Mortgage App Can Help
With the Canadian Mortgage App, you can find out how much you could afford.
Using the Get Pre-Qualified calculator, you can enter different monthly amounts for living expenses and see how much you can afford to spend on a rental property. You can plunk in $1,000 a month and see how much you can afford. Then you can try $600 a month and see how much your maximum home purchase price goes up.
What are you waiting for? Download the Canadian Mortgage App today to try it out.