Milo vs. RBC: Best U.S. Mortgages for Canadian Investors in 2024

Canadian investors have increasingly shown interest in the U.S. real estate market, driven by the significant disparity in home prices between major Canadian cities like Toronto and many U.S. markets. In 2023, the average home price in Toronto was approximately CAD 1.1 million (USD 850,000), compared to a median home price of around USD 416,100 in the U.S. This gap presents an attractive opportunity for Canadians seeking investment properties with potentially higher returns (Toronto Housing Market.

Investing in U.S. Real Estate: Milo vs. RBC for Canadian Investors

Most Canadian investors typically start their journey by reaching out to local banks to understand their mortgage options, and a leading Canadian bank offering U.S. mortgage programs is RBC. RBC provides a range of mortgage products specifically for Canadians purchasing property in the U.S., with all their programs being based on the Debt-to-Income (DTI) ratio. This means that your ability to qualify is strongly dependent on your salary if you're employed, monthly bank statements if self-employed/investor, or retirement income if you're retired. It is a great option for those with a consistent and well-documented income flow but does limit your ability to qualify based on personal assets alone.

Key Features of RBC’s Programs:

• Income Verification: RBC’s mortgage offerings require detailed income documentation, including proof of income, creditworthiness, and property valuations.
• Adjustable-Rate Mortgages (ARMs): RBC offers adjustable-rate mortgages with initial terms of 3, 5, 7, or 10 years, amortized over 30 years to keep payments low. After the initial fixed-rate period, the interest rate adjusts periodically based on market conditions.
• Pre-Approval Process: Valid for 120 days, allowing investors to determine their budget and enhance negotiation power.

Potential savings of up to $4,500 in closing costs (offer valid for new customers until October 31st, 2024) (RBC Bank)

Detailed Breakdown of RBC Programs:

• Loan Terms: 3, 5, 7, or 10 years adjustable-rate mortgages.
• LTV Ratio: Up to 80%.
• Income Verification: Required, focusing on detailed income and credit documentation.

Milo Mortgage Programs

Milo specializes in providing flexible mortgage solutions for Canadian investors who may prefer not to rely on personal income for qualification. Milo offers more adaptable programs where borrowers can qualify based on factors such as the projected income of the property and their liquid assets, rather than solely on personal income. Additionally, Milo offers both fixed and adjustable-rate mortgages, including 30-year fixed mortgages, which are uncommon in Canada and allow for more seamless planning with stable monthly payments.

Here are the key features and programs offered by Milo:

• Down Payment Requirements: 25-30% due to the higher risk incurred by lending to international clients.
• Loan-to-Value (LTV) Ratios: 70-75% for purchases; 60-65% for refinancing.
• No Social Security Number (SSN) or Income Required: Ideal for investors who prefer qualification based on property potential and sufficient liquid assets.
• No Pre-Payment Penalty: Offers flexibility in repayment.
• Tailored Programs: Income-based, cash flow-based, and asset-based programs.
• Crypto Mortgages: Innovative options for investors holding cryptocurrencies.
• Quick Closing Times: Average of 21 days, with some programs closing in as few as 10 days.
• Extensive Coverage: Available in multiple states across the U.S.
• Online Process: Entire process can be completed remotely, with some state-specific exceptions.
• Fixed and Adjustable-Rate Mortgages: Including 30-year fixed mortgages for stable monthly payments and easier financial planning.

Detailed Breakdown of Milo Programs:

Income-Based Program: Conditions: 45% DTI ratio or lower, steady income, tax documentation. Benefits: Competitive rates, no need for new private bank relationships. Timeline: 45 days. Best for: Investors prioritizing low rates with a full financial profile.

Cash Flow-Based Program: Conditions: Investment property, minimum 12 months post-closing liquidity, greater than 0.75 DSCR ratio. Benefits: Qualification without personal income evaluation, suitable for self-employed. Timeline: 21 days. Best for: Easiest qualification.

Asset-Based Program: Conditions: Investment property, assets and property only considered for qualification. Benefits: Quick access to cash, minimal documentation. Timeline: 10 days. Best for: Fastest closing.

Milo offers distinct advantages over RBC for Canadian investors who prefer not to rely solely on personal income for qualification. With flexible mortgage programs that consider the projected income of the property and available liquid assets, Milo caters to investors seeking more adaptable financing solutions. The availability of 30-year fixed mortgages provides stability in monthly payments, enhancing long-term financial planning. Milo's quick closing times and innovative options like crypto mortgages make it an appealing choice for investors looking for efficiency and modern financial products.

In summary For Canadian investors looking to expand their real estate portfolios in the U.S., both RBC and Milo offer distinct advantages depending on the investor's financial situation and preferences. RBC is ideal for high net-worth individuals with verifiable income seeking traditional mortgage products with competitive terms. Conversely, Milo caters to serious investors who prefer leveraging property income potential without the constraints of income documentation, offering flexibility and innovative solutions such as crypto mortgages and quick closing times. Ultimately, choosing the right lender depends on the investor’s specific needs and investment strategy.

The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.