Mortgage Newbie: Traditional versus "All in One"

[MentalAnarchy]

First of all, I'm well aware of the "official mortgage rate thread" in this forum, but for a first time home buyer like me, sifting through 350+ pages of random rate posts isn't exactly helping my confusion :-)

My current situation is that I'm looking to take advantage of the relative real estate crash in Hamilton to scoop up a student house and rent it out to supplement my mortgage payments. As a former Mac student, I'm well aware of what I'm getting into, and I've become convinced that it will be a better investment to buy a student house in Hamilton rather than a house costing twice as much in Toronto. I have plenty of money saved up for a down payment (I can afford 20-25% if need be), but at the same time, I'm planning on going back to school in September 2010, so I'm well aware that money will become more scarce in the next five years.

I've done a complete five year budget, and should be able to afford a "traditional" mortgage payment (assuming 3.5% + closing costs, insurance, and taxes) with some wiggle room to spare. So....

1. Would a so called "all in one" mortgage/account be the best thing for somebody in my situation? I know accounts like this allow you to put more money down when you need to (like now), and only require you to pay off the interest portion when money is tight (like it will be two years from now).
2. I know Canadian Tire, HSBC, and National Bank all offer some variation of this plan... any idea which one is the "best"?
3. If I'm going the "traditional" mortgage route, what product would be best for me?

Any help would be appreciated. Thanks, guys!

[jheath]

Well, that's a pretty loaded question. I'll take it a piece at a time.

For starters, National Bank is out. They are currently only offering the All In One on owner occupied, principal residences. Same thing with Canadian Tire, only owner occupied at this point. Manulife One recently tightened up some criteria and they now require 35% on rental properties. You can try HSBC, not sure on their policy.

This would be a "reasonably" good bet for your situation. What you have to take into account is that even though you "budgeted" 3.5%, your Line of credit portion will be at 3.25% with any one of these institutions, but that is variable and will go up with prime. Probably safe for a year or so, but this will definitely go up in the future. Several will allow you to lock in a fixed portion, but then you lose the ability to make interest only payments as well as "open" flexibility of it.

I would speak to a broker and look at a FirstLine Matrix mortgage. I know for sure you can get 80% with one of their lines of credit and will have the option of interest only. The other benefit is you can lock in a fixed portion at a very competitive rate of interest.

[MentalAnarchy]

Thanks for the reply. I guess this brings up another question -- what exactly qualifies as "owner occupied"? I know as far as the Home Buyer's Plan and tax rebate goes, there is no minimum occupancy required to qualify. In fact, as long as you have the INTENTION of staying at the residence at some point over the next year, you've met the requirement.

In my case, I'd probably spend anywhere from a week to a month living in and fixing up the house for student occupancy. In fact, there's even a small chance that I'll end up going back to Mac for school and living there permanently. Then again, I might not :-)

[BillyParadise]

Owner occupied = primary residence.

[MentalAnarchy]

Right, but if I'm living in a house for a week to a month, is that not considered a "primary residence"?

[sslinn]

As long as you can debt service the mortgage you will be fine at any of the lenders. You will swear an affidavit saying it will be owner occupied, but things change. If after a couple of months it becomes a rental property no one will care as long as the payments are made the bank will be happy.

Don't take anything I, or others say as gospel, talk to a real estate lawyer.

Good luck.