In British Columbia, one of the biggest hurdles for home buyers is simply getting approved for a mortgage — especially for first-time homebuyers. While owning a home comes with its own challenges, first, you need to navigate through the mortgage qualification process. This can be tricky.
One strategy that has become popular is building and operating a secondary suite, also known as an “income helper” or rental suite, in a house to increase how large of a mortgage you can be approved for. There are plenty of benefits to having a secondary suite but, there are also some challenges and hoops to jump through.
Some of the immediate benefits include:
Increased monthly income
Pay off mortgage sooner
Adds resale value
Approval for a higher mortgage
Because you will have an increased monthly income, financial institutions will take that into account. They can use anywhere from 50 to 100% of the potential rental income from your planned secondary suite and include it into your Gross Debt Servicing Ratio (total monthly expenses divided by total monthly income) and your Total Debt Servicing Ratio (annual mortgage payments, property taxes, and other debt payments divided by your gross family income) to determine your mortgage capacity (how much you can comfortably borrow).
Additionally, no matter where you’re thinking of building and operating a secondary suite, you have to understand the zoning bylaws for your prospective home. You may not even be allowed a secondary suite in your zone, so be sure to do your research before starting the mortgage qualification process.
Owning a home with a secondary suite also comes with some challenges. These include, but are not limited to:
Any and all repairs, maintenance, or upgrades to the home and suite
Responsibility for your renters
Collecting rent and managing renters
Covering your mortgage payments while finding new tenants
It takes a lot of hard work and responsibility to own and operate a secondary suite, but the payoff could be you living in your dream home.
If you are building a new home, be sure to communicate with your developer that you want a rental suite with the right specs — how many bedrooms, bathrooms, parking spaces, the size of the space, and any additional important details. For more information on the secondary suite bylaws in Kelowna, click here.
The specs of your secondary suite will determine how much you can rent the suite for once the house is complete and it will give your financial institution enough details so they can make an informed decision on what mortgage you qualify for — you also don’t want to accidentally give them a number that’s too low. Because every lender is different, be sure to ask your financial institution about their policy on rental income from an income helper suite during the mortgage qualification process.
For anyone who wants to pay off their mortgage faster or for first-time homebuyers that are looking to get approved for a higher mortgage, a secondary suite may be the best course of action for you. If you’re looking for an area with plenty of amenities, recurring people looking for a place to rent, and beautiful views of the Okanagan Valley, be sure to check out University Heights in Kelowna.
The zoning at University Heights allows for secondary suites and the neighbourhood is connected to Glenmore via John Hindle Drive, the University District, Kelowna International Airport, Aberdeen Hall Preparatory School, and UBC Okanagan — every year there are students looking for places to rent and they would love to be close to campus so you can pick the best renters to match your lifestyle.
At Ovation Homes, we maintain an open line of communication so that you get the home that suits your lifestyle. Let us know if you’re planning on owning and operating a secondary suite and we will work with you to optimize your space to include it while following all zoning and municipal bylaws. Contact us today and let’s get started on your dream home!