Looking to Buy an Rental Property? Beware of Big Bank Changes.

If you’re looking to buy an income property, you should know about the changes introduced by the big banks a few weeks ago.

In order to be approved for a mortgage, your lender will be looking at your debt service ratio. This will tell them how much income to debt you have, and essentially how capable you’ll be of paying back a mortgage loan. It’s changes within this ratio that now has many lenders including buyers of income property very upset.

Now, for every $100 of rental income a borrower expects to bring in, only $50 of that will be taken into consideration by lenders when deciding on mortgage approvals. It used to be $70 for every $100 – a big difference, if your income was already tight to begin with.

The big question is not only whether borrowers of income properties will be able to afford mortgages for these properties now, but whether or not some independent lenders will see an opportunity and start catering to this currently unserviced niche.