All posts by Joe Walsh
Creative Models For Home Acquisition and Mortgage Financing
“Creative Ways To Acquire a Home and Secure Mortgage Financing in Canada”
Before I get started with this post, I I’d first like to say that I neither recommend or condemn the following two approaches for home acquisition and mortgage financing listed below.
These are options in the market, and like any real estate and financing option, need to be assessed for relevance to an individuals situation and requirements.
Ok, so lets look at some alternative approachs.
The first approach is a “renter” model where a potential house purchaser who is not able to secure financing applies to a rent to own organization for assistance.
There are many variations of this model, but the one I’ve come across the most lately is where the buyer or renter identifies a home they would like to purchase, the renting company qualifies the house under their program and purchases it, giving a 5 year rental agreement back to the interested buyer.
The rental agreement fixes the rental rate for 5 years and includes a banking portion for a deposit so at the end of the 5 year period, the buyer/renter has the right to purchase the property from the renter at a predetermined price.
While this concept is not new by any stretch, the added twist of the new version is the pre-qualification of the buyer/renter at the beginning of the process so that they can be aligned with a home that they will be able to finance and afford in 5 years. The added benefit of some of these programs is credit counseling and credit repair assistance to increase the buyer/renter credit rating to a level that will support institutional financing in 5 years time.
The second home acquisition model I want to discuss is the builder model. In this model, a real estate intermediary works with a builder or group of builders to provide a cash back donation at the end of the building process when the property will be sold for occupation by the buyer.
Effectively, the builder is likely increasing the cost of the home by at least 5% and then offers the increase back to the buyer as a one time donation with no repayment requirements. This provides the cash down payment to secure an insured mortgage provided that the applicants credit and annual earnings support the mortgage requirements.
With the builder model, you may very well be limited to working with one builder and one house design, so this can be a bit restrictive, but will likely vary with each company marketing this type of program.
While both of these models on the surface appear to have some merit for certain individuals, an informed decision to participate or not will have a lot to do with getting into the details and making sure you understand all the related terms and conditions before signing up for anything. You may also want to consider getting legal advise if you’re unsure about the transaction or program requirements.
If you have any questions about mortgage options for these or other purchasing opportunities, give me a call and we will assess your home financing options.
100% Residential Mortgage Financing is Still Available To Canadian Home Owners
“If You’re Trying To Secure 100% Financing For a Residential Home Purchase, Give Me A Call To See If You Qualify For The Available Programs.”
With all the recent changes in mortgage financing programs offered by different lenders, there still is a way to get 100% financing at decent interest rates.
The solution is going to require qualifying for the mortgage insurance offered through the Canada Mortgage and Housing Insurance Corporation (CMHC).
For one or two residential property units, a 5% down payment is required to qualify for mortgage insurance. For three to four unit buildings, the down payment goes up to 10%.
The key to 100% financing is where to get the down payment.
CMHC actually offers three alternatives for coming up with a down payment that doesn’t come out of your own cash resources.
The first option is to receive a one time gift from an immediate family member that is not required to be repaid.
The second option is to finance the mortgage down payment through a lender cash back payment whereby the overall financing commitment is greater than what is required to purchase the property and the excess is used to fund the down payment (not very many lenders will consider this approach however).
The third option, which many people don’t realize, is the use of borrowed funds for the down payment. This can come from any other source, but the repayment requirements of the down payment debt will need to be included in the repayment qualification for the residential mortgage application.
Also remember that to qualify for an insured mortgage, your credit is going to need to be good and your income high enough to cover the repayment requirements.
There aren’t any B lender or sub debt options right now in Canada that provide a 100% financing option at the present time, so the only way to get it done is through an insured mortgage program.
To better understand how any of the above scenarios may work for your situation, I suggest that you give me a call and we’ll work through the various options together and figure out what the best course of action would be for your needs.
Debt Consolidation Loan Considerations in 2010
It May Be Time To Get Serious About Debt Consolidation in 2010 If It’s Been Something You’ve Been Putting Off
If you’ve been reading the papers or watching the news lately, you may have noticed that the financial experts out there are starting to talk about interest rates going back up.
Many economists feel that the interest rate is lower than it should be, but has stayed at current levels for close to a year to protect the economy from slipping into a deeper recession.
Now that things are starting to turn around, there is a good chance we will start to see interest rate increases before the end of the year.
And while even an increase of one percent doesn’t seem like much, it can make a big difference to your annual interest expense when you’re starting at floating rates close to two percent.
For debt consolidation activities, the goal is to combine various outstanding debt together into a new mortgage which will carry a far lower average interest rate. While this will still be possible to achieve regardless of whether or not rates increase, there is the chance that you’ll be cutting into your cash flow longer term by not consolidating sooner than later.
For example, if a family has a $300,000 debt consolidation mortgage today locked in for 3.5%, the annual interest costs, using simple interest math with no principal repayment would be $10,500.
If the consolidation occurred after a one percentage point increase in the three year rate, the increase itself would equate to a 29% increase in your interest payments, or an additional $3,000 which would work out to $250 a month.
So even though rates are still going to be low no matter how much potential increases may be this year, the result is still going to cost you money.
Debt consolidations can involve large mortgage balances which will produce significant interest costs even with small rate increases as the example shows.
The key point here is to not be putting your consolidation plans off. At the same time, debt consolidation is largely about the number and if you can afford to wait and avoid repayment penalties, you may be further ahead by delaying a bit longer.
Just make sure you redo the math every couple of months, and if the benefit is there, you may want to take advantage of it before it gets eroded by any rate increases, or disappears all together.
If you want to review debt consolidation scenarios with me, please give me a call and we’ll crunch through the math together to see what makes the most sense for your situation.
Private Mortgages Can Save Your Business
“If Your Business Owns Commercial Property And Requires Additional Capital For Operations or Lender Refinancing, Our Private Mortgage Financing Solutions May Be
You’re Best Option Right Now”
As we slowly start coming out of the recession in 2010, more and more businesses are trying to either find working capital to help keep the business going, or they’re trying to find a way to payout their bank.
When business down turns occur, cash flow can become strained and bank covenants can get breached.
Weaker financial statements will not likely allow you to get more financing from your bank and if you’re off side with your banking covenants causing your loans to be called, it may be very difficult to quickly move to a similar banking relationship.
When the business owns real estate, the alternative form of financing in many cases is funding via private mortgages.
Private mortgage lenders are less sensitive to bumps in the road and are more concerned with the underlying asset value, marketability, and the future prospects of the business.
The move to private mortgage financing is temporary in nature to allow the business to rebound back to its normal level of operating profitability at which time it will be able to return to a conventional banking situation that offers lower rates.
In many cases, its unfortunate that your bank will not work with you through what in many cases is a short term decline in business. Refinancing is always time consuming and can be fairly expensive, eating into equity you’ve built up over the years.
But refinancing via private mortgages also provides an option, many times the best option, to quickly inject cash into the business and/or payout a lender who is threatening to take legal action against you.
And if you wait too long trying to find a cheaper solution through another institutional lender, you could see the business deteriorate even further and risk greater losses or even business failure.
The obvious benefits of private mortgages are that they can be much faster to secure than conventional commercial mortgages and because the debt servicing requirements are interest only, the higher cost of financing may not result in higher monthly debt servicing payments. In addition, many private mortgages on commercial property are open after three or four months, so if you are able to get the business back on track quickly and locate a more favorable long term financing source, you can payout the private lender without any prepayment penalties after the initial months have passed.
If you’re like many business owners currently facing a cash flow crunch or lender repayment demand, give me a call so that I can quickly assess your situation and provide private mortgage options for your consideration.
Financing Challenges With Large Residential Mortgage Requests
“If You’re Having Trouble Getting Enough Financing For a Larger Home or Income Property Purchase, There Are Certain Approaches You May Be Able To Take To
Secure a Higher Loan to Value Ratio”
When you’re trying to acquire a residential or investment property that’s close to, or greater than $1,000,000, it can become difficult to secure a conventional real estate mortgage for the type of loan to value you may be looking for.
Most of the major banks will apply what they refer to as a sliding scale where they will lend up to, say, 80% of the first $750,000 of value for a single family dwelling and 50% of the remaining value in a “major urban center”.
If the location is more removed from a major center by whatever definition is provided, then the ratios can drop to 80% of $500,000 and 50% of the remaining property value.
Rural areas will see the sliding scale go still lower, requiring substantial down payments to cover the difference between approved mortgage and lending value.
There can also be different sliding scales for rental properties and recreational or vacation properties.
Each lender will have their own policies and procedures for assessing different scenarios and will have their own sliding scales to apply.
And hardest aspect of these conventional mortgage sliding scales is that they will be applied regardless of your personal net worth or level of earnings.
As an example, if you’re earning $800,000 a year and have a $5,000,000 personal net worth or higher, that new cottage property you’re looking at buying for $1,500,000 in a remote area may only attract a mortgage of $900,000, depending on the lending rules of your bank for this type of property in this type of location for this purchase price.
The good news is that there are ways to get higher ratio mortgages and get around these sliding scales. The best way to determine what other options may be available to you is to give me a call so that I can quickly go over your situation, outline relevant options, and help you decide on a course of action.
Private Mortgage Loans Can Save Your Business Cash Flow
Do You Need a Private Mortgage For a Commercial or Residential Property?
For businesses struggling to maintain positive cash flow through the back stretch of the current recession, private mortgage loans can be the best short term financing solution.
If you’re a business owner, you may have found the current recession to be very challenging in 2009. Many Canadian businesses have experienced a drop off in sales and a strain on capital resources as they try to manage through the recessionary slow down effects.
For well established businesses with long term banking relationships, they may find themselves now offside with lending covenants, overdrawn on working capital credit facilities, and getting pressure from the bank for repayment of arrears or even a demand to be paid out.
Yes, despite sometimes having a 10 plus year relationship with a commercial lender, one bad year, especially in a recession, will cause the lender to end the relationship.
With the business feeling there are better days ahead, refinancing is required, or at least additional financing to inject cash flow into the operations. But because of the most recently completed year being sub par, and credit perhaps getting strained, an institutional financing option is not likely going to be available and if it is, it will be hard to find.
When the business owns commercial and/or residential use real estate, the solution more often than not is private mortgage loans.
And while a private lender may look at a lot of the same financial information that an institutional lender does, they tend to be able to look past the obvious bumps in the road and become more focused on the future ability of the business to repay borrowed funds.
From a cash flow point of view, private mortgages are typically interest only, so even at a higher rate of interest, cash flow required for repayment can be quite similar to a conventional bank mortgage due to the fact that no principal is being repaid.
The business will secure private funds for one to two years, allow operations to get back on track, then return to the banks for cheaper money.
This may seem like an unnecessary and costly step for a well established business that’s gone through a tough stretch. The hard reality is that this scenario is playing out almost daily in the early days of 2010 as businesses try to get back on track from a tough 2009.
Private Mortgage Lenders end up being the white knight in many of these situations allowing the business to continue on without disruption.
If you have a business in a similar situation, please give me a call so we can go over your situation together and discuss what mortgage options may work the best for your needs.
Expect Mortgage Rates To Rise in 2010
While the economic recovery is still ongoing, signs from our neighbors to the south indicate that the Fed will be increasing the U.S. based lending rate in the near future.
Canada is expected to follow suit, which will likely see our prime rate go up somewhere between half a percent and one percent over the next 3 to 4 months.
While there is no guarantee of exactly what will happen or when it will happen, the probability is strong that a rate rise could be soon upon us.
At the same time, financial forecasters are not predicting large increases for the rest of the year, but the pattern to upward movements in interest rates now appears imminent as the economic recovery strengthens.
For mortgage holders with floating interest rates, this may be a good time to review your longer term options and consider locking up the current historically low rate levels available for 3 to 5 year terms.
For those of you contemplating mortgage refinancing or debt consolidation, there is still a great opportunity to take advantage of the low rates that have now been in place for the better part of two years.
One of the key things to remember with low interest rates is that when rates are low, small increases can have big impacts on your cash flow.
As an example, a one percent increase in interest rates may not seem like much, but if you’re currently carrying a mortgage with a variable interest rate of 2.25%, a 1.0% increase just saw your total interest payment increase 45%. And if you’re repayment is based on a long term repayment amortization, your overall monthly payment has also increased at least 40%.
While the current low rates have allowed many Canadians the ability to afford getting a first home or upgrading to a larger on, now is the time to look at making sure you’re going to be able to cash flow repayment well into the future by considering locking in the great long term rates we have available today.
If you’d like to discuss long term mortgage rate options or even a mortgage refinancing scenario, then I would suggest you give me a call and I’ll make sure you get all your questions answered.
Commercial Mortgage Applications Require Time, Money, and Patience
“The Commercial Mortgage Application Process Can Be Grueling At Times”
While a residential mortgage process can be completed in 2 to 3 weeks from beginning to end, the same is not true with commercial mortgages.
Residential mortgages typically require a $200 appraisal and the cost of a mortgage registration. For a commercial mortgage the costs can be significantly higher.
Here are some of the main reasons why your search for a commercial property financing will require time, money, and patience.
First of all, a commercial mortgage appraisal can cost several thousand dollars due to more required work, which takes longer to complete. In some areas, there may not be a large number of commercial appraisers available, so there can also be a waiting time of several weeks before they can even get out to inspect the property.
Second, most lenders now require an environmental assessment be performed on any property that they intend to finance. Sometimes existing environmental assessments can be used from past years, but in many cases an up to date environmental report is required. If there are any suspicions of contamination, additional assessment work can be required which will also take more time and cost more money. Like appraisers, it may take some time before an environmental auditor can get out to your property, which can further lengthen the process.
And even if you proactively get an appraisal and environmental audit completed prior to application, there is no guarantee that the individuals or firms you hired will be acceptable to the lender.
Commercial mortgage lenders may also ask for an updated survey of the property where title insurance alone won’t due and a physical survey will need to be completed by yet another qualified third party.
Moving on to repayment assessment, the lender will need to assess the financial statements of the business to see if there is sufficient historical evidence that the applied for mortgage can be repaid without placing a financial strain on the cash flow.
If the existing financial statements are more than 6 months old at the time of application, there is a good chance the lender will ask for updated statements prepared by a qualified accounting firm. More time, more money, and more patience required.
Private lenders don’t tend to have as many requirements for commercial mortgages as institutional lenders, but they still will likely want a commercial appraisal and a recently completed environmental audit, depending on the property and its usage.
The key to getting things done faster for the least amount of cost is to work with a commercial mortgage broker who 1) has access to lenders relevant to your requirements, 2) knows which third party consultants the lenders have approved for service, 3) understands how to project manage a commercial mortgage application process all the way from lender introduction to funding disbursement.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Builder Construction Loans
Builder construction loans are available to the occupants of a property or a commercial builder who owns the property for the purposes of construction and resale.
Regardless of the type of builder, the financing process is pretty much the same for construction on a single lot. The construction loan is granted based on the equity value in the land where the construction mortgage is being registered, any equity investment the builder is making into the project, and the estimated fair market value of the property after the construction phase is complete.
When a builder acquires multiple lots for purpose of construction and then resale, the financing process will vary according to the build out strategy.
If the builder plans to complete construction on one commercial or residential unit at a time, then the financing amount requested will be based on the building costs of one or two units. When the units are completed and sold, the construction loan is paid down and the approved funds can be made available at that point to the next project.
If the builder plans to perform construction on all the lots at the same time, a larger scale construction financing facility will be required to complete the work on the overall project and may require either approval of a term out loan at the end of the building process or a certain number of unit pre-sales to have been made prior to approval.
Alternatively, the builder can arrange a unique construction loan on each lot that will be retired at the end of construction either by an inventory loan or proceeds from sale.
In general, builder construction loans will depend on the amount of investment being made on any one property title that the construction mortgage will be registered on. The larger the investment per unique title, the more lender requirements in terms of 1) size of down payment; 2) builder qualifications; 3) presold units and deposits held.
Commercial builders that develop a relationship with a construction lender over a series of projects may be able to secure better rates and terms over time that one off projects as the volume of repeat business and the predictability of the result will have a value to certain sources of construction financing.
If you’re a building contractor or owner/builder seeking a construction loan, I suggest that you give me a call so that I can quickly review your requirements and provide construction financing options for your consideration.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
Military Relocation Financing
Military relocation financing mortgages and DND mortgage and mortgage transfer benefits.
If your a member of the Canadian military that needs to relocate, then you are likely going to have to change your place of residence and that can involve paying out your existing mortgage and acquiring a new one.
If you have mortgage related needs, then you’re also going to want to take advantage of the relocation services and allowances provided by the Department of National Defense (DND) for relocation and mortgage related costs.
As a qualified mortgage broker, I have successfully helped military personnel not only locate and secure a suitable mortgage, but also assisted them in getting the full benefit of the military relocation program.
The key mortgage related benefits offered in the relocation package include providing bridge financing to accommodate you through the process of buying one home while trying to sell the other as well as an allowance to cover any mortgage related costs that can occur from prepayment of the mortgage attached to the home you’re selling or a home relocation loan.
We work directly with lenders that are both familiar with the DND relocation programs and the administration that is required to apply any benefits you’re entitled to receive towards an eligible mortgage.
As mortgage brokers, our job is to make the process of finding a new home and getting the proper relocation financing arranged as quick and painless as possible.
And because we work all across Canada, we are able to provide services for any type of relocation that occurs within the country.
If you are in the midst of a military post relocation and need some assistance with your DND mortgage financing requirements, I would recommend that you give me a call so that I can quickly assess your situation and provide you with the most relevant options to consider.
Construction Financing Success Has a Lot To Do With Lender Selection
In the world of construction financing, all lenders are not going to be relevant or best suited to your project.
Many times there can be considerable urgency in finding and securing a construction loan for a project about to commence and any source of financing will do, or will it?
In other cases, a property owner may become overly focused on the lowest cost sources of construction financing when they may not be the best fit for the borrower and the project.
A construction project is all about accurately predicting and controlling costs, coordination of work, and managing cash flow. The combination of these three elements can have a lot to do with your lender selection.
For instance, if you want to use an institutional lender to provide construction financing, you have to make sure you have the time to prepare and provide the necessary information in the qualifying process that can be fairly extensive for some projects. Furthermore, because draw approvals are very tightly controlled by institutional lenders, you’re going to need very precise project management in place, or a large contingency fund to cover any draw reductions that are not uncommon with this form of financing.
If you’re short on time to get the project started and want to focus on utilizing funding from a private construction mortgage lender, then make sure you spend a bit of time selecting someone that you’re comfortable working with.
Private lenders are mostly individuals, each with their own approach to approving and managing the loan process. This is a departure from a traditional banking scenario where processes and procedures are well laid out and documented. Therefore, it can be very important to not only understand the terms and conditions of a mortgage commitment, but also the manner in which a specific private lender will go about administering the draw advancement process.
Whether or not you choose an institutional or private lending solution, you’re still going to be working with an individual or individuals who will be responsible for working with you through the construction process. If the people you meet and interact with don’t inspire trust and confidence, you would be highly advised to look for another source.
Mortgage brokers are also part of the mix, serving as the middle man for both the approval process and some or a lot of the draw advance process. Being comfortable with your mortgage broker, if one is involved, is also important to the success of the overall process.
The negatives that can occur should be obvious. If money is not advanced in an orderly and predictable fashion, the project could be delayed, resulting in additional costs that may be hard to cover and potentially kill the profitability and even completion of the project.
If you’d like assistance with locating suitable construction financing as well as lender selection, please give me a call so that we can discuss your project requirements.
Click Here To Speak With Construction Mortgage Broker Joe Walsh
Home Equity Line of Credit – When to Apply
A home equity line of credit can be an excellent source of readily available short term financing that can be used for any purpose.
The basic qualifications are solid credit, loan to value amounts of 75% to 80% of the property value depending on the mortgage program and lender, and a repayment assessment based on the three year fixed term rate for a fully funded mortgage.
The financing rates can be prime to prime plus 2 and the outstanding balance is always open to repayment without penalities.
Higher income home owners with good credit would likely qualify for this type of low cost short term or bridge financing any time they wanted while others may not be able to pass the prepayment test for the combined first and second mortgages that will be registered against the property.
Depending on what you’re motivation is for securing a line of credit, there will be different strategies for applying.
Ideally, a home equity line of credit is a great source of contingency financing and cash reserve to protect your family and cash flow from unexpected events. But like most forms of low cost financing, it will be very difficult to secure if not impossible at a time when you really need it if the your circumstances have strained your credit and/or reported earnings.
If this is your motivation to secure a home line of credit, then the best time to apply is simply when you would qualify.
That may sound a bit strange, but its also the nature in which financial institutions grant approvals for prime or prime plus financing.
As an example, if there are two working home owners, each with a good paying permanent job and good credit, the prospects of applying for a secured line of credit on a property that has available equity would be likely be very high.
But if one of the home owners was laid off and the family as a whole was struggling with managing cash flow for a period of time, it would be unlikely that a secured line of credit would be approved at that point.
The same is true of the self employed. You will have greater success applying for secured and unsecured lines of credit right after a good year, whether you truly need the money or not.
Once you have the secured line of credit in place, you can use if for whatever you like. So if there is a time when additional funds are required, for whatever reason, you will have a financing reserve system all set up.
And as long as the balance on the line of credit sees movement up and down over time, you’re not likely to have any issues with the bank. If you are sitting at the maximum amount of the line for a year or more, they may review your account and even reduce the line. But even if that came to pass, you would still likely be able to easily term out this second mortgage due to the fact that there is still at least 20% equity in the property and the available funds have likely helped protect your credit.
The current recessionary period only reinforces the need to have a some sort of financing back up plan to deal with the unexpected and unplanned and a home equity line of credit can be a great way to accomplish that.
New Rule Changes Announced For Government Insured Mortgages
Insured mortgages underwritten by Canada Mortgage and Housing Corporation (CMHC) will undergo a bit of a face lift starting April 19, 2010.
Minister of Finance, Jim Flaherty, announced three policy or rule changes to the mortgage insurance program.
The first, and perhaps most significant of the changes is that a borrower’s repayment qualification will be based on the 5 year fixed mortgage rate instead of the three year rate most lenders now use. Because longer term rates are higher over time, the lending decisions will now be factoring a higher level of conservatism into the repayment assessment.
What remains unclear on this point is the actual 5 year rate that will apply as some mortgage lenders have posted rates while others do not.
The second change impacts mortgage refinancing where additional funds are being drawn against the remaining equity of a residential property. Up until now, you could get an insured mortgage up to 95% of the property value on a refinancing. The new rules will drop this down to 90%.
The last change announced is the amount of leverage available under the program for non owner occupied properties acquired for the purposes of speculation. This would primarily impact the rental market where investors can also take advantage of the government backed mortgage insurance.
But with the change, investors are now going to have to put 20% down on any purchase, maxing the amount available through a CMHC insurable mortgage to 80% of the purchase price.
Many expected the changes to be even more significant as there have been concerns that the current policies were helping to promote a housing bubble here in Canada.
If you’re looking at a higher ratio mortgage that will require mortgage insurance and would like to know how these changes may impact your particular situation, I suggest that you give me a call I will make sure that you get all your questions answered.
The Debt Consolidation Process Can Both Help and Hurt Your Credit
Even though a debt consolidation process can pay down or payout your unsecured credit card and line of credit debt, it can also hurt your credit.
Let me explain.
While its not all that common of a practice, lenders that grant debt consolidation loans can require the borrower to close all the accounts being paid out, perhaps leaving the individual with no credit cards at all.
If the credit score was already low due to the debt being consolidated, the reduction in all available credit will likely make it even worse. And without any active credit cards of any sort, it will be basically impossible to rebuild your credit score.
This is where utilizing the skills of an experienced mortgage broker can come in handy.
While the lender may come back with the requirements to payout and close off all credit card and line of credit accounts, an experienced mortgage broker has the ability to try (and I do say try) to negotiate keeping a couple of credit cards and one line of credit open. If the broker is successful, then the borrower will have truly received the full benefit from debt consolidation.
The reason why this is even possible is due to relationships mortgage brokers can develop with the credit departments for various mortgage lenders. This provides some what of a platform for the broker to make a case on the borrowers behalf for a reduction in the severity of the payout requirements.
While an individual may try to attempt this on their own, its unlikely they will get very far as credit decisions tend to be very difficult to change.
And when you’re dealing with a mortgage broker that has a focus on debt consolidation, its very likely he or she will be proactively positioning for a positive outcome during their discussions with the mortgage lender prior to a commitment even being issued.
If you’re considering taking advantage of the current mortgage rates to perform some debt consolidation of your own, I would recommend that you give me a call so that we can go over your situation together and develop a plan to get you the best overall results.
Another Approach To Cottage Mortgage Financing
One of the best ways to secure cottage mortgage financing for a year round cottage property is through residential mortgage programs that allow a second mortgage for a single family unit.
These programs will allow you to qualify for an insured mortgage that can provide up to 95% required financing for the purchase of a cottage property.
The mortgage applicants would be required to have sufficient income to meet the debt servicing tests for the both properties combined and the home owner or a family member would be required to occupy the residence ( basically, the cottage property could not be used as a rental property).
For higher income families that are looking to invest in larger, year round cottage properties, these programs can be a great fit in that higher leverage can be achieved for very reasonable interest rates.
This type of mortgage financing can also be used for purchasing a condo property as a second home for the kids to live in while they go to university or work away from home. As long as an immediate family member is residing in the home and its not being used for a rental property, this second home would likely qualify under these programs.
In addition, both homes can also be financed through higher ratio insured mortgages provided that the borrowers can pass the debt servicing requirements and the possess the minimum level of acceptable credit.
If you’re interested in purchasing a cottage property, you may want to first inquire as to whether your existing home mortgage provider has this type of program. If they don’t, and your mortgage is open or near the end of its interest term, it may make sense to first move your mortgage over to a lender offering the two home program prior to shopping or trying to secure a cottage property.
This may take a bit of work to arrange, but if you’re able to secure higher mortgage leverage in the process for a reasonable cost of financing, you could either secure your dream cottage for less money down or start looking at higher priced properties that now can be financed through a second insured mortgage.
If you have a cottage mortgage financing need, I suggest you give me a call so that I can quickly assess your situation and provide relevant options for your consideration.