“Jumbo Mortgages Or Large Residential Mortgages For Properties in Ontario, Canada”
As of this writing, CMHC will not insure a new residential mortgage over $1,000,000.
And for those people in Ontario with higher value houses, this has become a bit of problem.
Because the major banks prefer to have as much of their mortgage portfolio insured against loss as possible, so it’s now become increasingly more difficult to get a large residential mortgage in place with competitive rates and terms.
This is not at all to say that you can’t get a multi-million dollar home mortgage in Ontario today. This type of mortgage product is very much available, but it can differ considerably from smaller residential mortgages.
For instance, if you have at least 20% down on a home purchase, and your mortgage is under $1,000,000, you can potentially be eligible to secure the best rates and terms available anywhere in the market place where you reside. But when the mortgage amount required gets higher than $1,000,000, things start to change.
First, forget about 20% down or 80% loan to value. Most Canadian lenders that are willing to issue million dollar plus type mortgages calculate the loan to value based on some sort of graduated scale where you may get 80% of the first, say $1,00,000 in property value and 50% on the remaining property value. For larger mortgages, the weighted overall loan to value on your property could end up penciling out at 65% or less.
Each lender will have their own rules related to lending amounts, but the end result is going to be the same, which is you’re not going to get 80% of appraised real estate value as a mortgage.
Second, the maximum loan amount is going to vary as well. Each potential lender is going to assess your situation and determine both the loan to value and maximum loan amount they are comfortable with. Many lenders have a hard cap in place of $2,000,000. The net result is that you’re going to be needing more equity (cash) in the deal.
Third, while your last three years earning and credit report may score out very strong for mortgage servicing, that still may not be good enough for higher loan requests. Larger mortgages are viewed by all lenders as being more risky and in the event of default, the probability of the lender getting their money out of foreclosure on a multimillion dollar home is considerably lower than a home that is less than $1,000,000 or $500,000.
So even if you near term earnings are very strong, there can be extra levels of scrutiny applied by a mortgage lender with respect to their assessment of your ability to be generating the same amount of income 5 years from now.
Bottom line, the repayment assessment can be significantly expanded in scope beyond your last three years reported earning.
So if you’re looking for a multi million dollar residential mortgage the Southwestern Ontario, what are the most likely options to finance a purchase, construction take out, debt consolidation, or straight refinancing of an existing mortgage?
Jumbo Mortgage Financing Alternatives
The first most obvious starting point is your bank. A banking relationship does have value and the more types of business you do with your bank, the more they will potentially lend to you on a jumbo mortgage application.
If that doesn’t work, its unlikely you’re going to get approved or get a better deal with a direct competitor to your bank.
In this situation, many people are turning to trust companies that will do large residential mortgages, but typically at higher rates and lending fees.
There are less obvious mortgage financing options that fall between chartered banks and trust companies, but they can be difficult to locate and and secure.
Here a glimpse of the types of mortgage financing program features are still available today for large or jumbo mortgage financing requirements… if you know where to look…
- No maximum loan amount
- 75% loan to value (no graduated borrowing ratios)
- Prime minus 0.5%
- 30 year amortizations
- Fixed or variable 5 year terms.
- 3 month prepayment penalties
- No lender fees on closing
So if you’re looking for a residential mortgage amount of $1,000,000 or higher for …
1) purchase, 2) refinance, 3) debt consolidation, 0r 4) construction take out, and have not been able to secure the financing you used to be able to qualify for under the old rules, then I suggest you give me a call at 416 464 4113 so we can go over your requirements and discuss potential options that you may not be aware of in the market.
If you call can get my voice mail, leave your name, number, and best time to call and I will call you back. Alternatively, you can click the link below and send me an email of what you’re looking for.
The jumbo mortgage landscape has certainly changed in both Ontario and the rest of Canada, but there are more options available today than most people realize. If you’re interest in learning more, give me a call today.