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How to get a mortgage for a house with a basement apartment

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How to get a mortgage for a house with a basement apartment

Kevin Yu

My parents are from Hong Kong. With very little money but many hopes and dreams, they decided to leave their home...

My parents are from Hong Kong. With very little money but many hopes and dreams, they decided to leave their home...

Apr 10 3 minutes read

Buying a property with a basement apartment can help pay your mortgage.  At the same time, you need to understand how to get financing and what details that you need to pay attention to.


Buying a property with less than 20% down (insured mortgage/purchase)


Purchase price up to $999,999


A client can buy a property with up to 2 units (legal or legal non conforming self-contained units) in it and use up to 100% of the rental income from the second unit to help qualify for more of a mortgage or a higher purchase price. 


For example: 


John and Sally have a combined income of $140,000, no debts


They qualify for a purchase price of $700,000 with 10% down....if they add a second unit or buy a property with a basement apartment they can use 100% of the rent to increase their buying power. 


Or (buy with a basement apartment and increase their buying power): 


Assuming they buy a property for $850,000 with $85,000 down and have a basement apartment that gets $1500 they qualify. In this case, assuming the basement apartment is legal or legal non conforming (fire retrofit) they will qualify. 


As you can see this will make a huge difference to what this couple can buy or how you can expand their buying power. 




Buying a property with 20% or more down (or any purchase over $1 million)


A client can buy a property with up to 4 units (and use 50% of the rental income from each unit towards qualifying)




Buying a property and adding a second income unit

*for both options above a client can buy a property and use purchase plus improvements to build the second unit, and use 50% of the rental income via market rent report*


This is an amazing option for a client to buy a property (east york bungalow for example) and put a basement apartment in it and mortgage the cost of the renovation of that second unit. 


Buying a property with purchase plus improvements and building in a second unit - AND including the cost of that second unit in the mortgage: 


for Example: 


Mike and Susy have a combined income of $170,000 and no debts


They qualify for a purchase price of $880,000, assuming the 10% down $88,000). 


If they buy a property and do purchase plus improvements to add a unit in the basement they can build a unit for say $40,000 


New purchase price changes to $920,000 - $92,000 (10% down)....and that unit rents for $1500 a month (we can use 50% of the rent or $750 towards qualifying for the $920,000 purchase price). 



As you can see this is a great way to help those clients buy a home and get out of that condo - assuming that is their goal. 


The rental unit not only helps them qualify for a higher purchase price but helps with the mortgage payments....and one day as their family grows they could always refinance and change the basement back into a rec room/family room easily. 

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