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Home Buying Hack! Buy with a Rental Suite and Qualify for More!

Buy a Home with a Rental Suite in Edmonton Mortgage Broker

Watch our latest video blog episode as Jay Lewis and Josh Tagg discuss the incredible benefits of buying a home with a basement suite. 🏡✨ Discover how a suite can increase your borrowing power, make your monthly payments more manageable, and open up new possibilities in the Edmonton housing market. Tune in to learn why this could be the perfect solution for your next home purchase! 🎥👇

In our latest video blog episode, Jay Lewis and Josh Tagg dive into the advantages of purchasing a home with a basement suite. This option can significantly increase your borrowing power and make homeownership more affordable. Let’s explore the details of how a basement suite can benefit you.

Increased Borrowing Power

One of the most significant benefits of buying a home with a basement suite is the potential increase in borrowing power. Josh explains that the extra income generated from renting out the suite can be used to boost the amount you are eligible to borrow. This can result in a substantial increase in your home-buying budget, sometimes up to $130,000 more!

The 39% Gross Debt Service Ratio

When qualifying for a mortgage, lenders typically allow up to 39% of your monthly income to be allocated towards housing costs, including mortgage payments, property taxes, and heating. For instance, with a household income of $120,000 per year, you can use $3,900 per month for these expenses. However, higher interest rates can limit your maximum purchase price.

Gross Debt Service Limit 39 Edmonton Mortgage Broker

Assuming a reasonable amount for property taxes and $100 a month for heating, this leaves a maximum qualifying mortgage payment of $2842 per month, which when run against the stress test rate of 6.99%, and assuming a 5% down payment, the maximum purchase price is $495,000.

Max Price without Rental Income Edmonton Mortgage Broker

Max Price without Rental Income

The Impact of Rental Income

By adding a basement suite that generates rental income, you can significantly improve your borrowing capacity. For example, if the suite brings in $1,000 per month, your total monthly income used for qualifying increases. We can also ignore the cost of property taxes and heat which also makes a big difference. This can allow you to afford a home priced up to $620,000 instead of the previous limit of $495,000. The additional income from the suite helps offset housing costs and makes higher-priced homes more accessible.

Max Price Edmonton Real Estate with Suite Rental Income

Affordable Monthly Payments

Another advantage of having a basement suite is the impact on your monthly mortgage payments. Although the mortgage payment may increase slightly due to the higher purchase price, the rental income from the suite can more than cover this increase. This results in a more affordable monthly payment and improved cash flow.

Flexibility in Home Choices

With the increased borrowing power and affordable monthly payments, buyers have more flexibility in their home choices. You might be able to upgrade from a duplex to a single-family home or choose a property with a front-attached garage instead of a rear lane house. The possibilities are vast, making it easier to find a home that suits your needs and preferences.

Changes in Zoning Requirements

Recent changes in zoning requirements throughout the city of Edmonton have made it easier to include basement suites in your home. These adjustments mean that a suite doesn’t necessarily need to be fully permitted and approved as a separate legal suite. It just needs to have separate access and meet certain safety standards. This change can be particularly beneficial for older homes, allowing more homeowners to take advantage of the benefits of a basement suite.

Permitting in Surrounding Communities

In addition to Edmonton, surrounding communities have also made it easier to permit and approve legal basement suites. This flexibility provides more opportunities for homeowners in these areas to add suites and enjoy the increased borrowing power and affordable monthly payments that come with them. Whether you’re in the heart of Edmonton or in a nearby community, the potential for adding a basement suite is now more accessible than ever.

Practical Examples and Cost Analysis

Jay and Josh provide practical examples to illustrate the benefits of a basement suite. For instance, upgrading a home to include a legal basement suite might add $50,000 to $70,000 to the purchase price. However, this investment can significantly increase the home’s value and the owner’s monthly cash flow. In their example, a $495,000 home with a basement suite could be valued at $560,000 to $620,000, depending on the specifics of the suite and the property.

Payment Example with a Rental Suite Edmonton Mortgage Broker

The additional rental income from the suite, typically around $1,000 per month, can far exceed the increase in mortgage payments. This means that homeowners not only get a better home but also enjoy more affordable monthly payments due to the rental income offsetting mortgage costs.

Consulting with Experts

Jay and Josh emphasize the importance of consulting with real estate and mortgage professionals to fully understand the benefits and logistics of buying a home with a basement suite. They recommend reaching out for a personalized consultation to explore how a basement suite can work for your specific situation. Their expertise can guide you through the process, from understanding zoning requirements to calculating the financial benefits.

In conclusion, buying a home with a basement suite offers numerous advantages, from increased borrowing power to more affordable monthly payments. With recent zoning changes making it easier to include suites in Edmonton and surrounding communities, now is a great time to consider this option. For more insights and expert advice, be sure to subscribe to the Edmonton Home Team YouTube channel for regular updates on Edmonton real estate and mortgages.



Josh Tagg has been the owner of Mortgages For Less since 2006. During that time Josh has developed a reputation for being an industry leader and advocate for client education.


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