Found that dream home with a fully finished basement suite? Love that duplex but can’t decide which unit you prefer? Worried that you might not be able to qualify for the mortgage that you need? Worry no longer – you can take advantage of that extra space in your dream home AND qualify for the mortgage to purchase it. If you’ve ever considered setting up some space in your home for rent, then you’re in luck!
Qualifying For A Mortgage with an Income Suite For Rent
If you’re hoping to qualify for a higher mortgage, you should consider purchasing or building a new home with an income suite. When qualifying for a mortgage in Canada, you can use 100% of the gross rental income that you would generate from a two-unit property that you live in. If you want to purchase your home and rent out the basement or garage suite, you could qualify for a higher mortgage!
While generating rental income is a great way to pay off your debts and shorten the length of your mortgage contract, it’s also a great way for first time homebuyers and young families to get into the housing market. With increased restrictions on qualifying for a mortgage in Canada, choosing to purchase a home with an income suite might be a good option for you.
Should I Buy a Home with an Income Suite?
If you’re a first time homebuyer and are unsure whether you’ll be able to qualify for the mortgage that you want, you should consider shopping around for homes that have basement units, in-law apartments, or garage suites. No matter what neighbourhood or city you live in, there are likely a number of houses that have an income suite that can be put up for rent. If you are hoping to build your dream home, there are a number of options that can help you get started generating rental income.
While owning a larger home and generating rental income may sound like a great idea, you should be cautious about jumping right into a decision. When you start shopping for your home, regardless of the size of the property or whether or not you want to buy a property with an income suite, you should be completely sure that you will be able to carry your mortgage. No matter what kind of home you purchase, you should stick to good financial practices both during and before you purchase your new home.
If you want to buy a home that requires a larger mortgage, you’ll be taking on more financial risk, even if there is the opportunity to generate rental income on the property. As your mortgage principal amount increases, the interest costs and land transfer taxes will also increase on a more expensive home. If your future tenant moves out and you aren’t able to find a replacement fast, you might be stuck struggling to make your mortgage payments – that’s a situation that you never want to be in.
Having the option to offer an income suite for rent would be a great way to help you realize your home ownership dreams, but you should first review your financial situation and budget before making the decision to purchase a larger home, whether it has an income suite or not.
What Should I Consider Before I set up an Income Suite?
If you think that your financial situation lends itself to purchasing a home with an income suite, there are a few things you should know before you begin your foray into the life of a landlord.
First, in order to use the would-be rental income for your mortgage qualification, you need to be sure that the suite in your new home is self-contained. The living space for your tenant must have its own entrance, kitchen, living areas, and sleeping areas that are separate from the rooms that your family will use. While these main rooms must be separate, you can still share a yard, parking spaces, a laundry room, storage spaces, and hallways.
When buying or building your new home with an income suite, you should first evaluate the profitability that you might expect from your property. When you search for the right neighbourhood, you should be looking at what other rental properties are asking for rent. What amenities are they offering with the rental? What would your property need to make it stand out from the other options nearby? Think about these questions as you consider the floorplans you are viewing or thinking of building.
Remember that even though you’ll be generating rental income on your property, there are also expenses that come with renting your space. There are costs associated with keeping the rental space in good shape, paying property taxes, insurance, and even possible maintenance expenses that can add up fast. Whether you are planning on renting your property or not, you should have a chunk of money set aside for any unexpected expenses that might arise during your time as a homeowner and landlord. The upside to this is that you can claim certain items for tax deductions! These deductibles will vary, but you should look into what you can claim before you decide whether you want to put up your income suite for rent.
Being a landlord isn’t for everyone, but if you’re looking to qualify for a mortgage that will get you into your dream home, being able to list an income suite for rent in your new home might be a great option for you.