All posts by Joe Walsh
Mortgage Rates Fall?
“Mortgage Rate Drop By Canadian Mortgage Lenders Considered to Be A Short Term Thing”
Yes, we have been on the rate increase band wagon now for several months and by the way, I’m still on it.
All indications are that interest rates in general are going to continue to rise which means more future mortgage rate increases coming your way.
But with this week’s mortgage rate reductions of 15 basis points with most major mortgage lenders, we are reminded of how complex and interrelated the global financial markets are.
With the financial crisis in Greece, the global domino effect has generated a positive interest rate impact in Canada. Don’t ask me how all the math and money movement plays out to give us a short term interest rate increase reprieve. Just don’t get caught up in any thinking that this is a new trend with interest rates going down.
At the same time, rates right now are lower, so if you can take advantage of this short term rate reduction, it can mean dollars in your pocket over time.
If you have been looking at locking in a rate for 120 days or refinancing strategies, this may be a good time to re crunch all the numbers to see if there is an opportunity for you to save some money going forward.
Its also really hard to say how long it will last. All indications are that the Bank of Canada is likely to increase its bench mark lending rate on the first of June. It has been sitting at 0.25% now for over a year and is expected to start going up this summer.
All indicators are still pointing to the continued rise of long term residential mortgage rates so you would still be wise to consider what you’re going to be comfortable with going forward in terms of the mortgage risk you are likely going to be exposed to if you’re in a soon to be expiring interest term or a floating interest rate term.
If you’d like to quickly see what types of rates we can lock in for you today, I suggest that you give me a call so I can provide you with your relevant options for immediate consideration.
Residential Mortgage Rate Averaging
“Here’s Another Strategy To Consider When Looking To Protect Against Higher Residential Mortgage Interest Rates”
One of the challenges with trying to lock in a long term interest rate when you already have one in place is that the prepayment penalty associated with paying out the existing mortgage with a new mortgage is cost prohibitive in many cases.
This is because most mortgages charge an interest differential penalty that calculates the difference in the current rates versus your existing mortgage rates times the amount of time left in your existing mortgage term (the math is a bit more involved, but what I’ve described above provides the basic idea).
Just from a logical point of view, this type of penalty does make some sense as the mortgage lender had to acquire the funds from somewhere in order to provide you with a mortgage. Those funds came at a cost, and the mortgage lender needs to maintain a margin between their own cost of money and the interest rate they loaned the money out at. If they didn’t do this, every time borrowers wanted to move to a lower interest rate, the lender would lose their shirt as they would still need to pay the same original cost of financing on the money they borrowed, but would not be able to re-lend it out at the same rate that your original residential mortgage was written at due to the fact that rates are now lower.
Conversely, as rates rise, the interest differential calculation will drop as the gap between the current rate and your existing mortgage rate will narrow.
So if I’ve totally confused you, I apologize. All you really need to understand is that if you are locked into a higher interest rate term on your existing mortgage, you’re likely going to have to pay a penalty for paying out the existing mortgage early if the current market rates are lower than your mortgage rate.
So other than paying the prepayment penalty, what else can you do to lock in a lower long term interest rate?
One strategy is to ask your mortgage lender if they have any mortgage rate averaging or blending programs available. These programs, which can fall under a variety of names, essentially take your current mortgage term and average it with their posted long term rates to come up with a combined rate that is lower than what you’re paying now and can be locked in for years into the future, depending on the length of time you pick.
Under this type of strategy, you’re undergoing rate averaging, not mortgage refinancing.
The net effect is that you still end up paying the interest owing for the remainder of your current mortgage term, but get to take advantage of the existing lower term rates for the future period you’ve chosen without having to shell out any cash in the form of a prepayment penalty.
When Does A Second Mortgage Make Sense?
“If You’re Looking To Secure Additional Mortgage Financing, Here’s Some Things To Consider Before Signing a Second Mortgage Commitment”
When additional mortgage financing is required for debt consolidation or other refinancing purposes, the mortgage holder has a few basic choices. They can refinance the existing first mortgage into a new mortgage or they can obtain an additional mortgage registered behind the first mortgage in place.
The two main criteria to consider when looking to refinance an existing mortgage or secure a second mortgage are 1) total net interest cost and financing costs, and 2) repayment requirements.
If for example, the prepayment penalty is going to be significant for refinancing a mortgage with a fixed interest term, the net interest cost may very well be lower by applying for a second mortgage with either a fixed or variable rate.
Second mortgages typically are offered with fixed interest terms. For a variable rate, the second mortgage tends to come in the form of a home equity line of credit secured by a second position mortgage registration.
If a borrower can qualify for either a low fixed rate second mortgage term or an equity line of credit, the decision of one of the other is going to depend on the borrower’s view of future interest rates and their plan to repay principal over time. With a line of credit, the full mortgage balance can be paid back at any time. Fixed terms can have prepayment privileges, but there will be restrictions in place.
For individuals with weaker credit, private second mortgages are typically secured to again produce the lowest net interest cost for both mortgages combined. While the interest cost of the private second mortgage could be 12% or higher, if the amount of the mortgage is small in comparison to the existing first mortgage, the weighted average cost is still likely going to be lower than trying to refinance the first mortgage with weaker credit.
The key with private second mortgages is that they tend to come with one or two year interest terms, so there needs to be a plan in place or being worked towards to payout or refinance this debt at the end of the interest term.
Because there are several variations and strategies to utilize a second mortgage financing option, its best to work with a mortgage broker to make sure that 1) a second mortgage is the right choice for securing incremental mortgage financing, and 2) the type of second mortgage program selected is the best fit for your requirements.
Mortgage Broker Services Grow In Value
“With All The Changes Going On In The Capital Markets, Mortgage Broker Services Have Become More Important”
The last several months have seen a couple of mortgage interest rate increases, more increases expected, changes in mortgage insurance policies, HST on the way, and housing pricing uncertainty going forward.
As a mortgage broker, all of the above have kept me on my toes and reinforces the role mortgage brokers play for our clients. It seems that every application these days is a bit more challenging to get approved and the amount of discussion to go through all the issues related to a particular property and financial profile has also increased.
Lenders have also become more a bit more cautious as they too work through all the changes. Basically, this amount of change always slows down the works for everyone as a certain amount of efficiency is lost due to everyone in the system adapting to new policies, procedures, and so on.
For the average person trying to make sense of everything in order to make the best potential decision for their family or business, the process can be overwhelming, excessively time consuming, and potentially very frustrating.
When most mortgage broker services are paid by the lender, it makes a great deal of sense to get professional help when working through all this stuff. A bad assumption or missed information can cost you tens of thousands of dollars over time, so its really not worth taking the chance if you don’t have to.
I admit that I’m totally biased when it comes to the topic of using a mortgage broker, but when I see people clearly struggling with the mortgage financing process these days when they’re getting good quality assistance, I can only imagine what its like for those that try to figure things out on their own.
Banks have become more aggressive lately with their sales efforts to try and retain or attract your business. And while these door to door mortgage agents provide excellent service, they still can only provide you with one set of options which may or may not be the best for your particular situation and personal or business requirements.
As a mortgage broker, I have broad access to the Canadian mortgage market at large and I don’t have any biases or preferences with respect to lenders. My objective is to find the best solution to your mortgage requirements, regardless of who the final lender may be.
Commercial Mortgages Need More Time
“When You Apply For a Commercial Mortgage For Acquisition, Refinancing, or Expansion, Make Sure You Allow For Plenty of Time To Complete The Process”
When it comes to mortgage financing, a person’s typical frame of reference is the last time they bought or refinanced a residential home. In most cases, a residential mortgage commitment can be obtained in a matter of days with mortgage closing to take place approximately 10 business days after wards.
With commercial mortgage financing its a whole different ball game when it comes to financing with respect to the amount of information lenders need to review and the time it can take to complete the process.
The first thing that can significantly impact time is the availability of business financial statements. Because the financing is for a commercial property, the mortgage repayment will be coming from the business and therefore, the commercial mortgage lender’s repayment assessment will be based on the historical financial statements of the company or business entity.
Many times, companies will wait the full 6 months after a year end to complete their financial statements in order to comply with government reporting requirements. If the business applies for commercial property financing before the financial statements are completed, the process will likely be delayed until they are available.
The second potential problem with repayment assessment is if the business applies 6 months or more after a year end when financial statements are available, the lender may still want an accountant prepared interim statement due to the amount of time that has passed since the last year end.
The process can be further delayed while the business owner is waiting for the completion of lender requested property appraisals and environmental audits. Sometimes a business owner will proactively commission an appraisal and environmental assessment prior to applying for the commercial real estate mortgage to speed up the process.
However, this can actually back fire if the appraiser and/or the environmental auditor are not on the lender’s approved service providers list. If this is the case, then the reports may have to be redone incurring additional costs and further delaying the process.
If there are any outstanding deficiencies or balances due from passed approved building permits, property taxes, site survey, appraisal, or environmental audit, these issues will likely have to be resolved before a commitment can be issued or signed off.
Because of all the requirements and due diligence involved, its also important that you’re applying to the most relevant lender so you don’t end up going through the whole application process and still not get a commercial mortgage approved and funded.
If you have a commercial property you’re looking to acquire, refinance, or expand, please give me a call so I can quickly assess your requirements and provide the most relevant financing options for your consideration.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Debt Consolidation Options For Small Business
“If You’re Small Business Needs Additional Capital, But You Don’t Currently Have The Credit or Financial Statement Profitability To Secure Business Financing, Home Mortgage Financing Options May Be Your Best Bet”
In the past, I’ve talked about private mortgages, institutional second mortgages, and mortgage refinancing as strategies you can take to secure additional capital for a variety of purposes including personal debt consolidation and business capital injection.
One of the draw backs to all these options is that you’re getting a lump sum of funds that you may not need all at once and the prepayment options can be fairly rigid or non existent for many of these types of mortgage programs.
Especially in the case of small business owners where the flow of money is not necessarily consistent, the need for more flexible sources of capital are required or preferred.
In the current market, many small businesses are experiencing strained credit with suppliers and cut backs in credit from banks and trade accounts. Longer outstanding payables and delays on making loan and credit card payments create a vicious circle that feeds on itself making the situation worse.
Business financing solutions of any type when you get into a strained credit scenario are almost always going to be more expensive than any type of home equity, many cases by more than double the interest rate. So if you’re committed to the business long term, it makes sense to seriously consider debt consolidation and incremental capital procurement options that can come from the equity in your home.
The one form of home mortgage equity financing we haven’t discussed very much is equity lines of credit that are available for those with fair to poor credit and are self employed. These programs can range in interest rate from 9% to 13%, which can be considerably lower than the asset based lender’s offer to finance your equipment from 2% to 3% a month.
These lines of credit tend to be secured by a second mortgage against the property and allow you to increase or decrease your outstanding balance as funds are required or funds become available.
Now there aren’t many of these programs on the market, and they tend to look at self employed applications on a case by case basis when assessing debt servicing ability, so the eligibility rules will vary from scenario to scenario.
But if you’re self employed, and have a bunch of short term debt squeezing the life out of your business, then this could be a great option to stem the ebb and flow of your cash flow.
If you’re self employed and would like to learn more about the different types of mortgage products that would allow you to consolidate business or personal debt, please give me a call and we can go through your situation together.
Construction Mortgage Draw Process
“Here is An Outline of How A Typical Construction Draw Process Works”
Ok, so you’ve got a commitment in place for your construction mortgage, you’ve started work and are getting close to the completion point for the first draw.
Now What?
First, lets take a step back and provide a basic overview of the construction draw process.
For a residential home construction project, there are typically 4 draws issued by the construction mortgage lender. In most cases, the first draw is issued after the foundation is in place, the second draw is issued when the structure is enclosed and secured, the third draw is issued when the drywall is finished, and the fourth draw gets issued at the completion of the project.
In direct accordance with the lien act, hold backs for each draw (typically 10%) will be retained in trust by your lawyer. All draw related costs including lender required expenses are to be covered by the borrower.
Hold backs are paid out 45 days after completion provided that there are no liens registered against the property.
Before the first draw can be issued, there are a few things most lenders will require.
First, a completed survey showing the boundaries of the new home, or title insurance, is required prior to the first draw.
In cases where the property is not connected to a municipal water supply, the borrower must have water potability and septic certificates prior to the first draw. It this condition is not met when the first draw is requested, the lender may cut back the draw and retain an additional $5,000 to $10,000 until such time that the certificates are available.
The lender will also either do an inspection of the work completed or hire a third party appraiser to assess the work completed and the work remaining. This procedure is required by the lender to validate that the borrower’s investment and required equity in the project are appropriate before the lender will issue any advances against the construction mortgage.
Once everything is in order, the draw advance will be issued and costs incurred to that point in the project can paid up.
If you have any additional questions related to construction draws for either residential or commercial construction projects, I suggest you give me a call and I will make sure you get the information you’re looking for.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
Mixed Rate Mortgages – Key Benefits
“Another Strategy To Deal With Rising Interest Rates Is A Mixed Rate Mortgage and The Benefits It Provides”
With mortgage rates on the rise, many mortgage holders are still reluctant to make the move away from a variable interest rate in order to lock in a longer term fixed rate where rates have already gone up.
In this situation, a borrower may be moving from a rate under 2% to something closer to 4.5% just to protect themselves against long term interest rates that are unknown at this time. Going from 2% to 4.5% is a big jump in terms of your mortgage payment with the interest cost more than doubling.
So one strategy that mortgage holders are now looking more closely at is the mixed rate mortgage which has both a variable interest rate portion and a fixed rate interest portion. Effectively, with this type of residential mortgage program, you have two mortgages in one.
The main benefits of this type of residential mortgage program are related to interest rate and principal prepayment.
With respect to interest rate, you would end up with a blended interest rate based on the variable rate and the amount of principal assigned to the variable component and the fixed term rate and the amount of principal assigned to the fixed component.
Most of these mixed rate programs offer generous prepayment options which provide you a great deal of flexibility to manage your interest risk and costs going forward.
As an example, if rates spike up, you can pay down the variable rate portion of the mortgage and then you will be left with the fixed rate to effectively put a ceiling on your near term interest rate risk.
If interest rates flatten out or even start to go down again, you also have the ability to prepay the fixed interest portion as well to take advantage of lower rate levels that you feel more secure about.
These dual rate mortgages, or split mortgages as some like to call them are a great tool for those that like to have the most flexibility with their mortgage program without taking excessive interest rate risk.
If you would like to learn more about mixed rate mortgages, please give me a call and so we can go through your mortgage requirements and see how this type of mortgage product would apply to you particular situation.
Debt Consolidation Challenges Ahead
“The Benefits of Debt Consolidation Through Mortgage Refinancing Are Still There, But Getting Harder to Come By”
There is no question in my mind that one of the best ways to escape the clutches of run away consumer debt and save your credit score in the process is by taking advantage of the equity in your home and refinancing your mortgage in order to payout or pay down your consumer debt.
This has long been a solid strategy to consider and undertake and will remain as such into the future. The challenge is that the road to accomplishing this is getting a bit more tangled and some of the benefit it slowly eroding.
On the benefit side, if you have been delaying a debt consolidation action through mortgage refinancing, the longer you delay, for whatever reason, the less interest rate savings you’re going to achieve due to the current trend of long term mortgage interest rates rising.
A one or two percent increase in mortgage rates may not seem like much when you’re consolidating a 19% credit card balance, but keep in mind that the higher rate is going to apply to the existing mortgage balance being paid out by the new mortgage as well as the consolidated funds. When you consider that many mortgage holders will also increase the amortization period on the new mortgage to make their cash flow work, small changes in interest rates can translate into tens of thousands, even hundreds of thousands of additional interest over time, depending on the amount of the new mortgage.
In terms of getting a debt consolidation loan approved and in place, the recent changes in the mortgage insurance rules have not only reduced the amount of the home value that can be refinanced from 95% to 90%, but the overall impact of the changes have made mortgage lenders more cautious overall and the process of getting mortgages approved has become more complex with lenders asking for more information to assess the application which takes more time to complete and doesn’t always result in the rates and terms you may be looking for.
For those with excessive levels of consumer debt that are not getting paid down, it still makes a great deal of sense to consider mortgage refinancing as a solution, but it makes even more sense get the debt consolidation process completed before more rate changes and mortgage rule changes come into play.
This is also one of the many instances where working with a mortgage broker can provide tremendous value working through all the twists and turns in the market right now.
Great Private Mortgage Rates On Commercial Property
“Private Mortgage Rates on Commercial Property Now As Low As 7% in The GTA”
The commercial financing world has been turned upside down. Long held as the gold of traditional lenders in their portfolios, the commercial mortgage market is slowly getting taken over by private lenders.
Well, perhaps taking over is a bit strong, but definitely gaining share in this property mortgage market is not an understatement.
Traditionally, private mortgage interest rates started at 10% for the better deals with an interest term of no more than one year and a hefty private lender fee. But that has been changing as more and more investors flee the stock market and take refuge in mortgage financing for the security it offers and the predictability of return.
In strong market regions like the Greater Toronto Area, privates have gone so far as to offer interest rates as low as 7% with interest terms of two to three years in a lot of cases.
This is largely driven by the higher quality of available deals as institutional lenders continue to take a cautious approach to issuing commercial property mortgages. And with the best available institutional rates in the 5.5% to 6.5% range, private mortgages are right there with respect to being competitive.
While most privates do not offer an amortized payment, the interest only payment is kind to the cash flow and allows business owners somewhere to park their financing during the current economic storm in the capital markets.
Private lenders tend to be very regional and there are many areas that don’t have a lot of private mortgages available, especially not at 7%. But for those who happen to be in the highly sought after market areas, the private loan rates are definitely something to consider.
This includes commercial property financing for both commercial and industrial properties. Lending requirements can still be similar to the banks in terms of what a private lender wants to see from the borrowers, but the decisions tend to be made much quicker which can make all the difference when you’re trying to close a transaction that’s on the clock.
While private mortgages are rarely a long term solution, right now they may be the best solution available to you for a commercial property purchase or refinancing situation. Definitely something to consider if you are looking for commercial property mortgage financing.
Mortgage Rates Continue Their Climb
“Its Not Time For Chicken Little Yet As The Sky Isn’t Falling At The Moment, But Mortgage Rates Are Continuing To Rise And Need To Be Taken Seriously By Mortgage Holders”
Yesterday the Royal bank increased its fixed rate mortgage program by 15 basis points with the TD following close behind and all others expected to be making similar moves in the next day or two.
The trend to higher rates continues as has been predicted and talked about over the last couple of months. The Bank of Canada still hasn’t moved its overnight prime lending rate, but that could change by as early as June.
So with out sounding like a broke record, everyone needs to start rethinking their mortgage rate and repayment strategies. As an economy in general, we have developed a mindset of longer amortization periods and floating interest rates where the masses have ridden out an unprecedented period of cheap mortgage money that have allowed many to purchase a home for the first time and many others to buy larger homes.
But as rates increase and continue to increase, the realities of interest rates settling in at a higher range over the coming months and perhaps years means that its going to cost more to pay for housing, that there will be less money to spend on other things, and that faster repayment strategies are going to be essential to avoid excessive future cash flow being paid towards interest payments.
While the CMHC’s latest consumer mortgage survey indicates that consumers are comfortable with the first round of mortgage rate hikes, or felt they could easily adapt to them, the same is not expected to be true with further increases.
For first time mortgage holders, it has been easy to be spoiled by the current mortgage rates and potentially live to the fullest extent of their means without a great deal of equity in the home and a long term mortgage amortization in tow.
Now is the time to rethink and re-valuate your long term financial goals and where you plan to spend your disposable income in the future. It doesn’t make any sense to ignore the obvious and those that do will find themselves in a cash flow crunch and potential crisis that could have been avoided through a bit of forward thinking.
At the same time, we are not talking about a panic as interest rates are still very low in relation to historical levels. But its better to be safe than sorry and a slow rate creep upward over time can catch up to you, directly impacting your lifestyle and retirement goals.
Click Here To Review Your Mortgage Repayment Strategy With Mortgage Broker Joe Walsh
Quick Mortgages Are Private Mortages
“When You Need a Fast Closing, an Interim Mortgage, Or a Bridge Loan on a Property Deal, The Best Form of Quick Mortgage is a Private Mortgage”
There are times when you need a mortgage quick.
It may be interim financing or maybe a bridge loan. It can happen when you are short on time and cash. A family member may be in a bind and asks for an unexpected favor, or maybe other options have been exhausted.
Maybe you have bought an investment property, such as a condominium, and your financial situation has changed.
This occurs often; the closing of a new condominium can take three to four years time from the offer to construction, registration and closing. During that time your financial situation could be completely changed. Employment situation, more debt or maybe a divorce or separation could have occurred.
Regardless, you are legally obligated to close the transaction. On the positive side, the condominium has increased in value. You may want to quickly resell the condominium once you close it.
Unlike the usual mortgage application which require a lot documents that need to be authenticated and which take time to be processed, private mortgages can be can be approved and closed in a few days.
So what are some other advantages of a bridge or private mortgage?
You can be provided with an open mortgage. This way you have more options available to you once you close. A quick sale can happen and the mortgage can be paid off without a penalty. (keep in mind the rate will be higher than bank rates, but since the mortgage is usually for a short period, the costs still make sense).
Another advantage is the possibility of 90% or 100% financing. Private mortgages are usually approved with a ‘make sense’ approach. A lender may lend you a full purchase price of $200,000 on a condominium that has increased in value to $300,000.
There is the advantage of a quick answer is quite valuable at times. Sometimes you can call us in the morning and have a commitment in your hands by the afternoon.
We’ve done deals where a conventional lender has pulled the commitment on the day of closing.
An instance of this was a purchaser that elected to close in a corporation. The bank would not fund because of that and quick bridge financing needed to be arranged. We approved the deal on the same day and closed it a few days later.
Private Mortgage Lenders More Like Banks
“While There Is More Private Mortgage Money Available These Days, Its Not Necessarily Easy To Secure”
Private mortgage lending has moved out of the closet and more into the forefront these days as we enter the current era of asset based lending brought on by the recession.
Gone are the days when most private lenders would just look at the available equity in a property and make a lending decision based on their comfort level in taking over the property in the future in the event of default. While these types of private lenders still exist, the larger majority are evolving into quasi institutional lenders that still offer higher rates that traditional lenders, but not before a higher level of due diligence is completed.
The private mortgage money lending world is growing as stock market investors seek more secure investing opportunities and banks remain largely on the sidelines for less than stellar property financing opportunities.
The private mortgage loan is typically a form of short term bridge financing, and in the current economy there is an excess of these short term deals to go around even though there’s more private money available than ever before.
Here are some of the key drivers for the increasing number of private mortgage applications:
- Traditional lenders are not providing mortgages for anything less than an “A” deal. Many of the mortgage requests that would have historically been done by a bank or institutional mortgage lender are ending up on the desks of private lenders. There is competition among privates for these higher quality deals which have resulted in lower interest rates for the better deals.
- Business owners are not meeting their covenants or are in arrears and the bank is calling the loan. In the current market, its not uncommon for an institutional lender to act quickly on delinquent accounts even if the business can clearly demonstrate that better days are ahead. Private lenders step in to provide short term bridge financing until the business’s financing profile improves enough to return to a traditional lending facility.
- Institutional Lenders Are Taking Their Time With Deal Assessment. The recession has caused traditional lenders to be more cautious when making financing decisions, asking for more and more information before a deal can be funded. The longer lead times put deals at risk and they end up being done with a private lenders in order to get closed in the time required.
And while private mortgage lenders are clearly open to all these types of deals, they are also getting more selective and doing more checking on each deal to make sure they’re not putting their money into a potential headache.
The new breed of private lender would rather not have to take the property back in default, and are very focused on the borrower’s exit strategy for repaying the private mortgage at the end of its term.
Click Here To Speak To Mortgage Broker Joe Walsh About Private Mortgage Financing.
Ontario Commercial Mortgage Financing For Gas Stations
“What Types of Commercial Mortgage Loan Options Are Available For Ontario Based Gas Stations?”
While there are still some institutional lenders that will look at gas station financing, the majority of banks, credit unions, and term lenders are only interested in gas stations that are relatively new, are under the flag of a major gas supplier, and have at least one strong tenant that contributes to the cash flow of the business.
To qualify with an institutional lender, you are going to also have to have a recently completed phase II environmental report, a commercial property appraisal, contamination insurance policy, and a tank monitoring system.
The institutional requirements will be very high and the time it take to complete the financing will likely take several months due to all the supporting information that will need to be collected or created by third party consultants.
Even the institutional lenders tend to be very geographic specific and will only entertain a gas station financing application if it fits into their portfolio at the time when financing is required.
Needless to say, it can be very difficult, costly, and time consuming to secure an institutional commercial loan for a gas station purchase or refinance.
As a result, the majority of Ontario gas stations are financed by private lenders who tend to be focused on the provincial gas station market and are very well educated into gas station operational risks as well as how to identify a gas station they will consider for financing and how to quickly determine if one is not going to be of interest to them.
Even with private lenders, the environmental assessments, tank condition, tank monitoring, and liability insurance are going to be important as any existing or perceived environmental liability could render their security worthless.
With private lenders that provide commercial loans for gas station properties in Ontario, they have a high degree of focus in their due diligence on the performance of the operating business. The most important statistic that many of them look at is the annual volume pumped by the station. Even if a station has marginal profitability (which could be caused by a number of management issues) as long as the volume numbers are at a certain level for the size and location of the station, the application can get serious consideration from a lender.
Like most private mortgage lenders, the security being offered must be looked at in terms of its resale value. The private lender will not provide gas station financing unless they are prepared to take ownership of the station in the event of mortgage default and are confident in their ability to re-market the security if necessary to have the mortgage repaid.
Similar to other types of private lending, the incremental interest rate can be 4% to 10% above comparable institutional rates, depending on a specific location, borrower profile, and risk assessment.
Private lenders will also tend to make their decisions much faster than traditional lenders and can offer a variety of mortgage commitments including short term interest only, long term interest only, and amortized principal and interest payments.
If you have a gas station mortgage financing need in the province of Ontario, give me a call and we can discuss what types of options are available for your situation.
‘Killing Ewe Softly’- Cooling down the Real Estate Market in Canada.
“How The Mortgage Market And Politicians Are Working Together To Keep The Housing Market in Check”
Call out the dogs; circle the sheep – let’s move em’!
Its official… They’ve gotten together to slow down a real estate market that seemed unstoppable.
Who?
The banks, the bureaucrats, and the politicians for the most part.
Why?
We seem to be making our payments – mortgage arrears are at a normal level.
That’s today, but what about next year? It’s all about next year and the years after that.
With Government deficits continuing to increase at all time levels, sooner or later the money supply has to tighten. Mortgage rates may even go up to double digits. Think I’m crazy, well for those of you old enough to remember, we had double digit rates through most of the crazy 70’s and the 80’s.
So what have ‘they’ done, to cool down the market?
CMHC has made some subtle changes that will have a ‘not so subtle’ impact. These changes include a reduction in the loan to value on refinancing, tightening the rules for the self-Employed; and borrowers working for commission only will no longer be eligible for the program.
The biggest tweak is a cut back on rental properties. Borrowers will need at least 20% down payment to obtain CMHC insurance, on investment properties. Real Estate Gurus cross the
Country are still preaching that the road to riches runs through a multitude of properties purchased using high leverage and low down payment. Starting next month, they might find the conventional halls
empty.
Banks and other Mortgage Lenders are doing their part. Mortgage Interest rates are rising. Every Tick up, knocks a percentage of buyers out of the market.
Don’t forget the HST. HST is just around the corner. How will this affect the market? We don’t know for sure, but the smart money may not be betting on real estate.
Keep in mind that the years of a lop sided trade balance with China has left them with lots of Canadian and American Dollars to spend.
There will come a time when China will stop buying up the debts of North America. China is a huge buyer of U.S. Treasury Bills. This may not go on forever. When it stops, the need for funds will still be
there and they will have to raise the interest rates even further.
So what does this mean to us?
It means a lower quality of life for those that don’t get on top of their debt and credit management. Money that should be spent on health
care and infrastructure will be going to pay interest on debts.
What can we do?
We can secure a low interest rate for a medium to long term mortgage. We can make efforts to pay down debt, consolidate so we’re not paying high rates on loans and credit cards.
Talk to a Mortgage Broker that can go over your situation and come up with a few options that can help.
Another option is to just ignore what is going and get pushed around like the rest of the he ‘herd’.