House shoppers in Vancouver will notice that many, if not most, homes on the market here have what is referred to as a “mortgage helper”; that is, the inclusion of a suite or self contained unit, usually situated on the ground floor or in the basement, that is meant to be rented out in order to generate additional income for the home owner. Some real estate listings make mention of an “in-law suite”, which is essentially the same thing and consists of a bedroom or two, living area, three-piece bathroom and a kitchen. In Vancouver’s real estate market, homes that include these suites are a hot sell for more reason than one. First of all, they make paying off a large mortgage faster and mitigate the financial strain that owning a home in the Vancouver market can create. Second, it is sometimes easier to get approved for homes that have an in-law suite because the borrower can cite the potential money generated from the rental space as income. They aren’t called “mortgage helpers” for nothing, after all.
It is extremely important for you to have all the facts about the home you are buying, especially if you plan on purchasing a home with a mortgage helper. Many people assume that there are few, if any, rules attached to income suites but that is unfortunately not the case. There are some facts you should know that will save you from disappointment when it comes time to approach the bank for a mortgage. There are two main sorts of suites. Authorised suites, meaning that they have been built to code, have been inspected by a qualified inspector and are approved by the city as safe for human habitation. In the case of authorised suites, the yearly property taxes will often be higher because of the income property. In contrast, unauthorised rental suites, which are increasingly common, may present a few obstacles for the home buyer. Depending on the bank and the requirements of the insurance company you are dealing with, unauthorised suites may present a problem and actually make it difficult for you to get approved for the mortgage because your lender may refuse to take into account money generated by the suite, thereby making you less qualified for the loan you desire.
Some other things to consider when purchasing a house with a rental suite:
You will need to collect information regarding zoning, as some homes with basement suites are only zoned for single family residential occupancy. Purchasing such a property can prevent you from legally renting the space. If you decide to rent the suite anyway and you wind up with bad tenants, your legal options will be limited, leaving you in a very complicated situation. Another consideration is whether or not there are tenants already occupying the suite who wish to stay following the sale of the house. If, for example, you really did want the suite for your mother-in law, you cannot simply ask the tenants to leave. You must abide by not only the landlord Tenant Act, but also the terms of the lease under the previous home owner.
The process of sorting through the complicated rules surrounding mortgage helpers can add a lot of stress to the already overwhelming task that is buying a home. A qualified mortgage broker like me can help you wade through the jargon and get the best rate possible. Why do more work than you have to? Contact me with any questions you have about your mortgage.
