Potential landlords may consider buying apartment buildings rather than houses or condominiums because of the lower mortgage rates and greater financial flexibility available, reports Business Vancouver.
Apartment buildings are considered commercial property, which allows buyers to qualify for taxpayer-insured mortgages at lower rates than residential buyers.
Unlike residential investors, who are restricted to putting down at least a 20% on the home, and therefore don’t qualify for Canada Mortgage and Housing Corporation (CMHC) insurance, apartment building investors can arrange CMHC financing with as little as a 15% downpayment.
While residential investors are restricted to 25-year amortization on mortgages, commercial landlords can buy extensions to 30 years or even 40 years.
The main benefit for commercial landlords obtaining CMHC insured mortgages are the low interest rates that can be locked in for long term financing.
Current rates for a five-year term for a commercial landlord are around 2.6% and 3.4% for a 10-year term.
