Differences in financing in Ontario?

[Ryan Stevenson]

Hey guys, I've been reading a lot of the bigger pockets books and others on real estate investing, they talk a lot about FHA loans etc. I don't believe we have anything like this in Canada, just lower DP for first time home buyers and land transfer tax rebates? What are some of the differences in the two countries? are there any creative financing strategies here? Any tips or anything that can help new investors?

[Roy N.]

@Ryan Stevenson

In Canada, you and your lender have access to high-ratio, insured mortgages through the Canada Mortgage and Housing Corporation (CMHC) {or one of two private insurers: Genworth and Canada Guarantee} which is our equivalent to FHA and similar programs in the U.S.A. Whether you are insured through CMHC itself or one of the private insurers, it is colloquially known as CMHC insured mortgages.

The programme allows for an owner occupant to insure a mortgage with an LTV >80%: In the case of an SFH or duplex, up to 95% LTV (5% down payment); for a triplex or quadruplex, up to 90% LTV (10% down payment).

Property transfer fees are a provincial matter and while some provinces {like Ontario} do provide rebates to first-time home buyers (again, owner occupied), this is not universal. 

The differences in financing residential (1-4 unit) properties between Canada and the U.S.A is considerable: qualification requirements are more stringent; financing products & terms are different; interest is calculated differently; the concept of "points" during financing is all but unknown in Canada, etc.

The process of financing commercial real estate between the two countries is much more similar.

There are creative financing strategies, but the best thing to help a new investor is knowledge. I like to recommend Steven Cohen and George Dube's "Legal, Tax and Accounting Strategies for the Canadian Real Estate Investor"  as a primer.