Turning Your Existing Home Into A Rental While Purchasing Another Home

If you’re planning to buy a second home, you might consider turning your primary residence into a rental property, also known as an investment property. This will give you the ability to purchase a new owner-occupied home with as little as a 5% down payment. Often this can be done with lenders allowing for a hypothetical rent amount to offset qualifying numbers. That way, you can move into your new home while converting your primary one into a rental before even having a tenant. To help you understand the benefits of doing this, mortgage broker Jordan St. Pierre has explained the process below. 

Typically, people sell their homes when they move, taking the equity they’ve built in one house and applying it to the next- but not always. Some homeowners convert their primary residences into investment properties. This is usually done for one of two reasons:

First and foremost, a homeowner might take this route if the housing market is struggling. If they’re concerned their home’s value has dropped, they can hold off on selling the property, rent it out to pay for the monthly mortgage payments and then sell it when the value has risen.

Another common reason to turn a primary residence into a rental is to increase income, and often with a more secure return on investment than the stock market. Furthermore, if the home was originally purchased as a primary residence, it likely had a low interest rate. When the house is transitioned to an investment property, this perk can be kept. That said, the homeowner will need to be pre-qualified for the scenario by establishing a potential rent amount and working the qualifying numbers.

When turning a primary residence into a rental property, there are many mortgage and tax implications, so it is vital to consider working with a mortgage broker and accountant for a smooth transition. The taxes of an investment property owner will be handled differently. Unlike with a primary residence, one will be able to make a wide variety of deductions on their investment property taxes. Utilities, homeowner association fees, repairs to the house, insurance, property taxes, mortgage interest, and more can be deducted each year. There are other potential deductions, such as depreciation, that should be considered as well. 

Using a mortgage broker with access to lenders that will allow for an offset of rental expenses to qualify is preferable as this will benefit you throughout the process. It is important to understand the rental property market before entering it and Jordan St. Pierre-The Mortgage Centre has the experience and knowledge to help clients navigate an ever-changing market.

For a mortgage broker in Edmonton, Spruce Grove, Stony Plain, St. Albert, Devon, reach out to Jordan St. Pierre-The Mortgage Centre. You can give me a call at (780) 953-7314 or email me at jordan@modernfinance.ca. I have been providing mortgage financing solutions to the greater Edmonton area since 2013, and my goal has always remained the same - to ensure that every interaction is a positive experience for my clients. I provide clients with financing solutions that are tailored to their specific needs, goals, and future plans. Whether purchasing, renewing or refinancing, I take an unbiased and honest approach to mortgages that leaves nothing to chance.

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