Can You Really Have No Money Down?

Can you really have 100% of the zero-down payment financing or real estate investment property? Do not have the money, but it seems you can not go wrong. But the fact is not the case.

Recently cmhc (Canada Mortgage and Housing Corporation), the insurer's non-traditional mortgage loans (less than 20% down payment mortgage) in Canada, introduced the 100% financing of investment properties. This is a product has been in existence for 23, the purchase of living for the grassroots, but now, if you want to get into real estate investments (and your credit is great, you can be eligible for 100 percent financing), you will no longer be necessary a pile of cash to jump! The challenge is to obtain the rent high enough to pay mortgages and 7.25 percent, and insurance premiums, they hit you! Here is an example:

* 300,000 yuan purchase price (100% owned)

* 7.25% cmhc insurance costs (21,750 US dollars)

* Total of 321,750 US dollars mortgages

* Amortization, 25 in the 5.99% interest rate =

* $ 2,056.67 monthly payment!

Therefore, the right of a well-off the bat you have negative equity 21,750 US dollars. If you want to sell that property after five years, your mortgage balance will be 289,008 US dollars. The property would have to appreciate at least 15 percent over all these years just to get a bit of money out, it (Remember, sales commissions, legal fees, the purchase of the property tax, will also come out of the sales price) .

The next challenge is to be 3,000 US dollars per month rent you will need for this property. Remember, it is not simply a matter of mortgage loans. You must also:

* Insurance costs (about 5% of the rent);

* The management fee (approximately 5% of the rent);

* Maintenance fees (5 to 10% or above);

* Water supply, hydroelectric power, other utilities (2-5% of the rent);

* Class or condo fees, if applicable (10% or above);

* Vacancy bulletins (2-5%).

According to our experience, if you keep your mortgage payments, a maximum of 65% of your rental income, you should be very close to a neutral or even positive income. In this example, this means that you want to earn about. 3,200 yuan rent in order to pay for everything. Is not possible, unless you are operating a room house, the type of property that is truly in line with its own challenges. I know, I bought two - they are the only two attributes, I regret that I bought (but it is a totally different story).

Now, there are two benefits: cmhc procedures:

1. Do not have the money - you do not need a large amount of cash, started to invest;

2. Huge potential rate of return on investment (ROI), and if the market is on the upswing;

So, this is not the worst of things, and use, but understand what is the "cost" you both in the potential negative monthly cash flow and negative equity.

Now, in other forms of 100% financing? Good, creative way of acquiring 100% financing, such as the recovery of the seller (the seller holding the mortgage property); acquisition of conventional mortgage (80% loan value), or through a bank loan, and a second mortgage whether the seller or private lender and registration, you buy a property (you must have 20% of the down payment after closing), or use your line of credit for 20% of the down payment. So, this is not to say that 100 percent of the financing does not work, or not used, this is quite costly, to do so. Expensive because it is not only your monthly debt (mortgage / loans) to provide services is higher, but usually is the second mortgage or line of credit interest rates much higher than first mortgage rates.

I have done a 100% and 98% financing if there is a financing, and is the only reason I can is because the seller is the initiative to sell. Why are they so motivated? Because their properties were beaten, and in the worst areas. Rent and financing is strong in both cases, so I bought. I would not do it again. As the saying goes, "you get what you pay."