That’s right! How would you like to have your tenants pay your monthly mortgage payments? This would mean; not a single penny from your pocket would be going towards paying off the mortgage. As you may know now, we are talking about a rental property. Here are some tips you should follow before approaching the official purchase of a rental property.

1. Look for a good/reputable real estate agent.
2. Look for a good/reputable mortgage broker.
3. Look for a good/reputable mortgage insurance broker.
4. Try to find a property that would not be vacant most of the time.
5. Try to find a property without major work that has to be done.
6. Make sure the property was not built too long ago (inspection will take care of these aspects).

Usually, when you purchase a four unit property, it will be classified as a residential property. If its is over, it will be put under as a commercial property. The issue with a commercial property is that it requires a higher ratio of an initial mortgage down payment compared to a residential property. This is where your mortgage broker/advisor would help, they will be able to provide information which will outline exactly what is what and the cost as well. You also would not have to worry about having a large sum of money saved up, to qualify for a large property. The reason is that; the rental income would help qualify for the loan. The lender will do some calculations to get an approximate value for the rental income and take that into consideration in the process of giving out the loan. You can read more about this in one of our articles here; “Would Rental Income Help Qualify For A Loan?”. This type of property is a great revenue puller, get in this market while you can! You would also need some insurance for your property other than the mortgage insurance. This insurance would cover anything caused to your building by tenants, IE: a fire.

Useful Links & Tools
Information On Private Mortgage Insurance (PMI)
How To Cancel Private Mortgage Insurance
Would Rental Income Help Qualify For A Loan
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This topic can be divided into three different sub-categories. Cancellation, termination which takes place automatically and final termination. Firstly we will look at cancellation and how to proceed for this to occur. You may be aware of the Homeowners Protection Act of 1998. Under this legal act, it said that any homeowner can request the cancellation of their mortgage insurance if they have payed out the mortgage to a level at which it is equal to 80% of the total purchase price. Your payment history will also be looked at so it wise to keep good records. You should not have payed 30 days late within the last year of your request or 60 days for the past two years. The financial advisor or lender may request some documents from you which will serve as evidence that the home value has not decreased below the original value and that you do not hold a second mortgage or a HELOC on the home. Secondly, the automatic termination process will be discussed. As above stated, under the Homeowners Protection Act of 1998, it is stated that a loan lender should automatically terminate one’s private mortgage insurance once the homeowner has paid 78% of the total house purchase price. The loan lender has a 30 day period to terminate all coverages. They are not allowed to collect any mortgage insurance premiums after the termination date. If for any reason there are some unearned sums of money, it should be refunded to the homeowners with-in a 45 day period. However, you should have a good payment history as above stated for the cancellation process. For some loans which are considered to be higher risk, the percentage is set at 77. Thirdly, in the case of a final termination, if the private mortgage insurance has not yet been cancelled; when the amortization period comes to a 50% hault, the coverage should be removed. IE: In a 20 year loan with 240 monthly mortgage payments, the 50% hault date would be on the 120^thpayment. However, the homeowner should have a clear history of no late payments within a certain time frame. Let’s say the 50% hault date is on January 13^th 2009, the final termination should occur within 30 days of this date.

Useful Links
+ Mortgage Tools
+ Information On Private Mortgage Insurance (PMI)