Posted on 9/1/2024 by Property Valet

Financing Short-Term Rentals - A New Era in Mortgage Approval


For years, short-term rental property owners have faced significant challenges when seeking financing. Traditionally, banks have been hesitant, if not entirely resistant, to providing mortgages for these types of properties. As many of you know, anything "new" in the world of banking and finance is often met with caution. Over the last couple of years, we’ve seen owners of short-term rentals forced to navigate an obstacle course to secure financing. At times, banks even suggested that clients refrain from mentioning that their property was a short-term rental just to get approved.

I’m happy to say that those days are behind us. In 2024, I’ve seen a major shift with one of our Big Six Canadian Bank partners now routinely approving mortgages for short-term rental properties. We’ve been securing approvals for as much as 75% of the property value at the same interest rates offered for regular investment properties. This is a significant breakthrough for the short-term rental market. No longer do investors need to hide the nature of their properties, and I expect that by 2025, other banks will begin to ease up on their policies as well.

Using Non-Traditional Assets to Boost Mortgage Approvals

Another area where we’ve seen some exciting developments is in the recognition of non-traditional assets in mortgage approvals. Historically, having significant amounts of money in RRSPs, TFSAs, or stocks didn’t help when applying for a mortgage. It was frustrating to see clients with large portfolios get declined simply because the banks didn’t consider these assets in their decision making.

That’s changing. Through our relationship with the Wealth division of a Big Six Canadian Bank, we can now use 10% of a client’s savings, stocks, and investments, like RRSPs and TFSAs, as income for mortgage qualification. For example, a client with $1 million in stocks can count $100,000 as income on their mortgage application. This development has been instrumental in getting many of our clients approved for mortgages that were previously declined.

This shift represents a significant breakthrough in the mortgage world, and I believe it’s only a matter of time before other banks start to follow suit.

These changes are a win for investors and property owners, creating new opportunities and simplifying the process of securing financing in a market that continues to evolve.

— Dave Butler, Mortgage Broker at Better Mortgage Select


PV Strategic Partners

At PV we continue to seek out and partner with best-in-class individuals and businesses to enhance and improve our full service offering for investors. Along with our realtors, insurance brokers, a financing partner with the broadest and most flexible options, for our Homeowners is a great asset and we are proud to be working with Dave and his team. If you're looking at a new purchase or refinancing, reach out today.

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