All posts by Joe Walsh
Dominion Lending
“The Joe Walsh Team Has Joined Forces With Dominion Lending Centres”
Dominion Lending Centres Toronto
At the beginning of October, our mortgage business launched a new Dominion Lending Franchise here in Toronto.
Operationally, we have the same location at 1935 Leslie Street here in Toronto, and all contact information remains the same, so for any of our existing and future clients, its all business as usual with our mortgage business.
What is different is out affiliation with Dominion Lending so I thought I would first let you know about it and then give you a bit of background on our decision.
As you may or may not know, Dominion Lending is the fastest growing mortgage company in Canada and many of the initiatives they are and will pursue going forward are very congruent with our own.
Let’s face it, the mortgage industry is continually changing and to stay not only on top of all the rule changes occurring on a monthly basis, but to also be on top of the state of the art technology for delivering information, products, and services to our customer, made Dominion a clear choice for our business.
From a mortgage product point of view, Dominion now gives us access to even more lenders as well as an expanded network of mortgage specialists and originators that can provide greater assistance in certain situations.
This provides our customers with even more choice when it comes to making a mortgage decision which will greatly contribute to achieving optimal mortgage financing results, whether we’re talking about residential, commercial, or industrial real estate properties.
The information systems, reports, and multi media presentations provide a great library of information that is designed to help borrowers to better understand the different programs and products available so that an informed decision can be reached that much faster.
And lets face it, as we all rapidly move forward into the information age with websites, social media, Youtube, Facebook, and the like, we also recognize that we have to be able to provide content to out customers in a manner than you most refer. This is another area where Dominion provides value to use as they continually make substantial investments in their information and information delivery systems.
As franchise owners, we will also have access to credit card programs and other financial products that get developed and set up by Dominion. More products and services provide greater value to our customers which is one main reasons why we made the decision to become part of the Dominion Lending Team.
There is more going on than I an elaborate on today. But I will be following up in the future to comment on more specific developments as they occur.
In the mean time, I invite you to give us a call or send me an email with any questions or comments you may have.
We welcome the opportunity to discuss this new business arrangement with our customers and also value any comments or feedback you are willing to provide.
That’s about it for today other than to say we are very excited about this new relationship and all the value it can help bring to our customers.
Mortgage Prepayment Calculators
“Using Prepayment Calculators As A First Step in Determining Prepayment Costs”
One of the more confusing aspects of any mortgage decision is the accurate calculation of a potential prepayment penalty now or in the future.
If you’re looking to refinance for a lower rate and/or to gain some additional funds, an exact prepayment calculation can be obtained from your mortgage provider at any time.
But if you’re in need of a new mortgage, it can be difficult to determine what the future prepayment penalty calculation will be for any given situation.
By law, mortgage lenders must clearly outline the detailed calculation related to prepayment penalties associated to any of their mortgage products.
That being said, lending sources have never made this an easy to understand process even though all the information required is technically “all there” for you to digest.
And having to crunch out the math on perhaps a number of future prepayment scenarios you may have in mind can not only be time consuming, but also easy to do incorrectly.
So with more and more complaints about the complexity of the math and the understanding of each lender’s criteria, many of the main mortgage sources in Canada now provide mortgage prepayment calculators for anyone to use free of charge.
Mortgage Calculators Provide Interesting Results
The article itself goes on to explain that after inputting similar scenarios into all the different calculators, that no two penalties ended up being the same.
This would clearly speak to the need for this type of online tool and judging by the ease of use and non use of some of the calculators, the tools need to also continually be improving.
Now, whether you’re doing some online research to refinance, you can at least get an initial feel as to what the prepayment penalty could be in a mortgage you are leaving as well as how the prepayment penalty would work for a new mortgage for different scenarios in the future.
Statistics clearly show us that consumers and business owners are going online more and more for mortgage related information and for this particular type of inquiry, these tools are a step in the right direction.
That being said, they also point out that there are vast differences in prepayment penalty calculations, and while the calculators mentioned in the article provide you with some data to work with, they are clearly unofficial with respect to any exact prepayment penalty you may incur now or in the future from any of the named lenders.
so while these resources are good for some online research, they don’t replace the need to be working with an experienced mortgage broker who can work through all the calculations and comparisons with you.
If you’d like to discuss prepayment penalties for a mortgage you now have, or for a future mortgage, I suggest that you give me a call and we’ll make sure you get all your questions answered right away.
click Here to Speak With Toronto Mortgage Broker Joe Walsh
Private Equity Mortgage Lenders
Private Equity Mortgage Lenders Focus On Available Property Equity, But Can Also Focus On Other Elements Before Funding A Deal”
Private money is being used more and more for short term financing options, both on residential and commercial property, where there is enough time, or the cost to complete is to high, to get a bank or institutional lender in place.
Strategically, many property owners and investors utilize private funds for bridging different transactions which can include buying the time necessary to find more ideal long term funding.
So while more people are considering AND using private equity lending as a primary option, there are still a lot of misconceptions in the market place about how private lenders make their borrowing decisions.
For instance, because private lending is always focused primarily on the equity in a property, then the immediate assumption is that not much else is going to be looked at or assessed by the private lender before making a lending/funding decision followed by near term funding.
Private Lender Due Diligence Can Be More
Than You Anticipate
The reality is that most private lenders will look at whatever they think is going to be relevant for them to get comfortable with a deal.
This most certainly will vary from lender to lender and even from deal to deal.
But the notion that just because you are asking for a private mortgage, that a due diligence process similar to what a bank would put you through is not going to be forth coming may or may not be true.
What is consistently true is that the lower cost forms of private money are going to perform more due diligence in order to make sure that there is very little chance of problems.
This can include review of financial statements, rent rolls, tenant contracts, and so on.
It can also include updating property and environmental appraisals similar to what a bank or institutional lender would require.
But many times potential borrowers will seek out private money with the expectation that there will not be this extra work or checking or review involved and just because a higher rate of interest is being charged, that assessing and lending against the equity in the property should be enough.
Certainly that can be enough, but as previously mentioned, that type of restrictive information approach can also lead to higher rates of interest and higher borrowing fees.
For these vary reasons, its not uncommon for a solid deal to end up being priced higher in the market because lower cost competitors were eliminated from the equation, based on the amount of information provided to them to assess.
There Are a Few Takeaways Here
First, the pricing on a private equity mortgage can vary considerably from one lender to another. Lower cost offerings are more likely to be provided for consideration when more information is made available to assess risk.
Second, if you have a strong financial profile to work with and are only trying to access private money for short period of time until lower cost long term financing can be arranged, then it can be highly beneficial to work with a private lender and provide the information they request, even if its information you don’t think they should need to look at as a non banking lending.
Closing On Commercial Properties
“Securing The Right Type Of Commercial Mortgage In A Timely Fashion Is The Key To Closing On A Commercial Property”
I’ve written quite a few articles relating to the process of commercial property financing, the costs you can expect, and the different forms of mortgage lending that should be considered in different situations.
Today I’m going to delve further into this topic by focusing even more on cost and timing related to longer term by and hold situations.
There can be many different scenarios unto which a commercial property transaction can complete.
The vast majority will require debt financing due to either a lack of cash or a desire to utilize leverage of capital.
But in every situation where debt financing is required, one must discern the relationships between costs and timing for getting the deal closed versus getting the best possible deal available in the market place.
Another way of saying this is that the optimal financing arrangement for the long term may not be the first type of financing that is arranged.
To close a commercial deal, you may need to seriously consider fast forms of closing with less conditions and work elements related to not only closing, but the decision making process for even getting the financing in place.
Lower cost forms of financing require new optimal conditions to exist before any funds will be approved and advanced.
The key to getting a deal closed is being able to quickly assess whether or not there is a very high probability of achieving an optimal lending situation in the time you have to work with.
If the initial assessment does not yield a high probability for landing low cost money for whatever reason, then its time to look at the next best option that CAN produce the high probability of success that you’re looking for.
Remember that first and foremost, the prime objective is to secure the property and hold it for a long period of time, either as an income producing property or an owner occupied asset.
So if the initial financing to close the deal is not the ideal financing, but something that can get the deal closed and buy time to get the ideal longer term financing arranged, then all options that are long term cost effective should be considered.
Getting Even More Specific On Cost And Timing
Depending on the size of a transaction, a bank or institutional lender will want to see a recently completed commercial property appraisal commissioned directly to themselves, an environmental appraisal, and financial statements no more than 6 months in age. When multiple properties and entities are involved, these requirements will likely need to be provided separately on each property and entity.
The cost and time it takes to complete this body of work can be considerable. Understanding these elements, their cost and timing are essential to the initial assessment process of where to get your commercial mortgage for closing purposes.
Conversely, a private lender that specializes in short term financing may be able to utilize property and environmental appraisals that are several years old as well as existing financial statements, both accountant prepared and interim statements.
While the cost of private financing is going to be higher from an interest rate and lender/broker fee perspective in virtually all cases, these costs can be significantly offset by not potentially having to get new supporting documents prepared. This is also not just a pure cost comparison issue either, as the value of your time to ride herd on the process can be significant in terms of other more profitable things you could be doing with those units of time.
On the the aspect of time, you can also have what I will call a reverse problem with private financing options.
With bank financing, the concern is needing more time to complete their administrative requirements.
On the private side, once you have been provided with an offer, most private lenders will only give you a short period of time to take the deal and move to funding.
This is due to the fact that they want to get their money out into the market and sitting around for weeks or months, waiting to be used as a last minute contingency, is not typically going to be an option for you.
So if you want to go down the private mortgage path for acquisition financing for a property, then you have to be prepared to act quickly on an offer or the funding will not remain available.
Another timing consideration is that if you wait until the last moment to move off a bank financing process to a private lending process, you may not be able to locate and secure private money as well, especially if you’re looking for more than $1,000,000 in funds as the privates that would potentially do the deal may not be in funds at that moment in time.
The key to commercial property closing then is 1) make a good initial assessment of what type of money is best suited to your situation; 2) make sure that the incremental costs will still make the acquisition profitable over time; and 3) be ready to move forward quickly on whatever path you choose to take so that you’re maximizing the probability of success.
Potential Bridge Loan Cost Elements
Here Are The Potential Cost Elements To A Bridge Financing Arrangement”
When looking to arrange bridge financing, at least part of the borrowing decision is going to be about the cost of capital versus the benefit you are going to get for putting a bridge loan in place.
To properly understand the cost//benefit relationship of any particular deal, you have to be able to accurately estimate the potential cost of capital prior to entering into a short term financing agreement.
Failing to do this may result in a higher cost than the value of the expected benefit, which in hindsight may have caused you not to acquire a bridge loan in the first place.
So What Are The Potential Loan Costs For Bridge Financing?
Depending on the specific lender providing short term or bridge financing, there can be a number of different cost elements to add into the projected cost of capital with some being more material than others.
For instance, there can be a different fee and cost structures from one institutional lender to the next and one private lender to the next.
This can also vary for business loans versus personal loans.
And yes, we are talking about projected cost of capital due to the fact that the effective cost of financing will vary depending on what transpires during the life of the loan.
Let’s break the costs down into fixed and variable components.
The potential fixed costs for the transaction can include legal fees, appraisal fees, environmental assessment fees, lender fees, and broker fees.
All these costs can be accurately estimated before any money is actually spent, but there can be some variability between what is estimated and the final cost paid.
For instance, legal fees can be quoted for the completion of a transaction or by time. Environmental assessments can require additional work which can lead to additional costs. Lender and broker fees are usually a percentage of the money borrowed, so if the amount of money to be borrowed goes up or down, these amounts will change as well.
The variable costs would potentially be things like transaction costs and prepayment penalties.
A lender will typically provide a list of service charges for different events such as NSF payment fees, partial discharges of security, and so on.
Prepayment penalties will be clearly spelled out, but will only be incurred in the event of prepayment prior to the completion of the loan term.
If you expect to repay the loan, or will need to repay the loan prior to the end of the term, then the prepayment penalty becomes a fixed cost.
How To Determine The Effective Cost Of Capital
Most bridge loans are for a period of one year, especially if they are backed by real estate security.
If you assume the worst case scenario and project that most potential costs are going to be incurred including prepayment penalties, then you would divide your total costs by the amount borrowed to arrive at an effective interest rate expressed as a percentage of funds borrowed.
But as I mentioned at the outset of this article, the cost of capital in dollars is the most important thing to understand so that you can determine if the value assigned to the benefits of acquiring short term financing outweigh the costs.
The actual interest rate expressed as a loan interest rate to be charged monthly or the effective rate of financing with all costs factored in is a secondary consideration to the actual projected cost of borrowing.
So once again, determining the worst case scenario and a likely case scenario will be important when evaluating a particular financing option as well as the cost/benefit relationship of the underlying deal.
Prepaying Private Mortgages
“There Can Be Several Different Options When It Comes To Prepayment Of A Private Mortgage”
First of all, when we talk about prepayment, we are talking about paying back all or part of the principle amount of a private mortgage before the end of the interest term.
This is not an unusual occurrence with private loans due to the fact that many are bridge loans and while the standard length for an interest term is one year, the use of the money may only be for a number of months.
And when the exit strategy to repay the loan develops prior to the end of the term for the mortgage, a prepayment of funds will occur.
For a mortgage to be prepaid, the mortgage needs to be an open mortgage that allows for early repayment.
If the mortgage is closed, no prepayment can occur and fill payment will be required at the end of the mortgage term unless a renewal option exists or is extended by the lender.
When a mortgage is open, there may or may not be prepayment penalties associated with early principle repayment.
This is going to be important to understand before you sign a commitment for private funding in that an open mortgage does not automatically infer that there will be no prepayment penalty.
For many private mortgages, the prepayment penalty is going to be three months interest on the amount prepaid.
But there are many different variations to prepayment penalties or costs as well.
Some mortgages will be fully open with no penalty for any amount of principal prepayment at any time during the loan term.
Other private loans will be open with no penalty after a certain number of months have passed from the start date of the mortgage, but have a penalty in place up until that point.
The actual amount of the penalty and the way its calculated can very quite a bit, but it cannot exceed the rules governing this action which typically cannot be more than three months interest on a mortgage with a term of one year.
So when you’re looking to secure a private mortgage on a piece of real estate you now own or are in the process of acquiring, try to match your prepayment options with your needs so that you can minimize your borrowing costs in the process.
At the very least, make sure you understand the prepayment options that are provided in a mortgage commitment so there are no surprises down the road.
Because private lenders are unique individuals that make their own lending decisions in many cases, you may also be able to negotiate a prepayment option that will work for you instead of just accepting whatever is provided in a loan commitment.
That being said, if time is of the essence to get funding in place, you may not have the flexibility to negotiate or seek out a superior repayment option in the time you have to work with. In those cases, make sure you at least understand what your options are and manage you cash flow accordingly if a prepayment opportunity arises.
Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh
Seconds Becoming More Popular
“Mortgage Rules Drive Demand For Second Mortgages”
The new mortgage rules on federally regulated banks (80% lending on refinance, $1,000,000 cap on residential, tighter self employed qualifications and fewer cash back options) has created an environment for more creative mortgage solutions.
And in some cases this can result in a second mortgage from a non federally regulated institutional lender or from a private lender.
The hole that people are attempting to fill is the financing over 80% on some type of refinance.
With the 2012 mortgage rules now in place since July, the maximum of 80% financing down from 85% may not seem like a lot, but it can can make the difference between making the numbers work and filling up your credit cards.
There still are some institutional lenders, particularly some credit unions, that are prepared to consider second mortgage financing up to 85%, providing that added bit of capital for those that qualify.
The same is true on the private mortgage lending side where some privates may even go higher than 85% depending on the real estate involved and the strength of the borrower. That being said, privates that go above 85% loan to value are in the minority of the private lending market place and higher loan to value amounts also tend to lend to higher interest rates.
But compared to being short on the cash required and having to push money into credit cards, most private money interest rate options could still be better than your readily available short term credit like credit cards provide. And even if you were to go with a credit cards to fill the cash amount required, you’re still using up the available credit you have to work with which can cause other problems including reducing your credit score.
Short term financing vehicles like credit cards also typically require 3% of the principal balance repaid every month were most private second mortgages are interest only.
Obviously the objective with any type of mortgage lending is to minimize the cost of capital as much as possible. So while some form of institutional second is always going to be preferred, a private mortgage option may end up being significantly less than any other alternative such as credit cards.
If you are looking at a private second option, make sure you are also looking ahead to how that second will be repaid in a year’s time.
Having a plan in place to repay this type of bridge loan us going to help insure that your finances will stay in order and that you won’t have to continue on with the private money option longer than you need to.
To find out more about second mortgage options available to you, give me a call at your earliest convenience and we can go through your situation in detail.
Cost Of Bridge Financing
“The Cost For Bridge Loans Is Going To Be Higher Than Conventional Loans For A Few Key Reasons”
Bridge loans by their very nature or definition, are short term loans or mortgages that are required to meet some form of short term obligation and in many cases the payout of the bridge funds in the first step in a process to get to the exit strategy that will repay the funds.
So first and foremost, there is a certain amount of transaction risk that comes into the equation for lenders.
Because the transaction to be completed and the related process required to get to an exit strategy to repay the bridge, has actions that need to be completed by one or several people, the transaction risk can be considered to be significant, even when all the pieces are lined up.
The result with respect to the cost of capital is that there is higher risk premium attached to most bridge financing transactions as compared to a more conventional transaction.
In addition to transaction risk is market supply and demand factors.
There are significantly less lenders in the market that will do bridge financing as compared to more traditional financing.
The lenders that do partake in this market have the skill set and resources to facilitate these types of deals including managing the exit strategy that will return their money.
Because the supply side for these types of deals can be lower than the demand side, especially when you build in the regional focus of most private lenders, there is a premium attached to these types of deals.
Another characteristic of bridge lenders is that they need to be able to assess and fund quickly as most bridging lending scenarios have very short timelines to work with.
In many situations the reason for the bridge financing in the first place is because some other form of capital or specific event to a transaction did not materialize when it was supposed, facilitating the need for another source of capital with the time remaining to complete whatever the deal is.
So in order to get bridge financing in place, the lender not only has to do this type of lending, but be able to do it quickly, which further reduces the amount of supply in the market place.
Speed is also the reason why either residential or commercial property financing is a preferred form of bridging due to the speed in which a property can be evaluated and taken as security.
Add all these factors up and you end up with a higher cost of financing related to risk, supply, and speed.
Borrowers on the other hand will argue that if all the pieces in the process to repay the bridge are in place that there should not be a higher cost of financing attached to these loans.
But this argument only holds true if there are several lenders in the market that would go along with the logic, which there typically is not, so we are back to the issue of supply and demand.
Bottom line, bridge loans save a lot of deals and even though the cost of capital may be higher than what you’re used to paying, the total cost of financing for a bridge loan may be a mere fraction of what you out of pocket cost or opportunity cost is if the funds are not made available to your deal in the time you have to complete it.
If you require a bridge loan and have assets to leverage, I suggest that you give me a call so we can quickly assess your situation and provide financing options for your immediate consideration.
Selectivity Of Commercial Lenders
“Finding A Commercial Lender That Can Help You Acquire A Property”
One of the real challenges with trying to purchase a commercial property is locating a lender that is interested at funding your deal at a given point in time.
This can be very challenging due to the wide variety of commercial properties in existence, the business status of any particular property, and the portfolio and interest of any given lender.
Let’s look at a couple of examples to further explain my point.
Properties that generate the most lender interest are going to be revenue producing properties that are generating substantially more cash flow than what would be required to service debt.
All commercial lenders are interested in cash flow, so on the surface, any bank or institutional lender could be interested in the deal.
But all lenders are also driven by the composition of their portfolio at any point in time. This can lead to situations where a deal completed by a bank last month could not be completed the following month if a similar deal was presented.
Unfortunately, the lender doesn’t necessarily tell you there is a pretty good chance of not being able to squeeze your deal into their portfolio and put you through the application process, potentially wasting time and money and putting your deal at risk.
One way to avoid running out of time is to get a slightly higher cost bridge loan to get the deal done and provide you with enough time to hunt the market for a preferred long term deal. Because cash flow is strong, this should not be hard to do and the added cost incurred is likely going to be small as compared to missing out on a good opportunity all together.
Now, lets look at the other extreme…properties that are not generating enough cash flow today to service debt.
These may be great buying opportunities in that the current owner does not have the means or ability to get the cash flow where it should be and has to sell out due to lack of capital to move forward, but what’s the right lender to take this deal to?
When we’re talking about less than optimal property acquisition, lenders tend to be much more selective in terms of the deals they want to take on. And once again, you can waste more time and money going through the application process for funders that do not have a high level of interest.
The ability to assess what a lender can or can’t finance and what they are currently interested in is very difficult to assess from the outside looking in.
Without following the market and being in regular contact with an active network its almost impossible to guess who to turn to.
This is where it can be very helpful dealing with a commercial mortgage broker who stays in tuned with the market and has a good sense as to where the most relevant sources are for any given deal at any particular point in time.
Being able to zero in on highly interest lenders quickly is going to be important for just about any application along with understanding roughly how your deal will be priced in order to make sure that any potential financing option you may be considering can align with your own cost of capital assumptions.
Click Here To Speak Directly With Commercial Mortgage Broker Joe Walsh
Financing Vacant Commercial Property
“Here Are Some Basic Parameters For Financing Vacant Commercial Property”
When we are talking about financing bare land or vacant land that is zoned commercial, there are a few things to keep in mind as the property owner.
First of all, is the land vacant with buildings that are not in use, or a clear and bare piece of property.
Second, are there services on the property or up to the property line? If there are no services adjacent to the property, where would they need to be accessed from and what would be the cost of getting them to the site?
Third, what has been the historical usage of the property over time and has there been any de-comissionings from past activities as well as environmental assessment reports?
Fourth, where is the property located. If a bare lot of commercial property is located within a major urban center, developed industrial or commercial park, this will have a considerable impact to lender interest than if its located in an undeveloped commercial park in a rural town.
All of these items speak to the potential resale market for the property which is going to be important for any lending consideration.
Vacant commercial land can be financed through a bank or institutional lender provided that all the above questions provide value added answers that reduce lender risk.
Further, a bank is going to want to see a source of debt repayment from an existing commercial cash flow in order to be able to fund this type of deal.
The weaker the overall profile, the more likely that this will become a private lender type of deal. And if debt servicing is cannot be demonstrated from existing cash flow, then prepaid interest may also be factored into the equation.
From a use of funds point of view, banks and institutional lenders are not big on equity take outs and prefer to see any loan amount invested into the property to further increase the security value.
Private lenders are less concerned about the use of funds if an equity take out for another project is required.
In terms of loan to value, whether we’re talking bank or private, the amount of financing you can expect to be able to secure on vacant commercial property is between 40% and 60% and 50% being the average.
Higher loan to value amounts would only likely be considered if the properly was on the verge of being developed or was sitting right on the edge of an active development area.
With respect to loan to value, because the land is vacant, it can be difficult to determine fair market value and in many cases a private lender will default back to what the land was purchased for as a base to lend from which can be considerably different from a newly completed appraisal.
Personal covenants can also be important as property lenders will want to get as much security as they can on any bare land lending scenario.
If you have a piece of vacant commercial property that you’d like to finance, I suggest that you give me a call so we can go over your situation together and discuss different options that may be available to you in the market place.
Credit Unions A Growing Alternative
“Credit Unions May Provide More Options For Some Residential Mortgage Shoppers”
With the most recent mortgage rule changes coming into effect during July, there remains to be seen how all the provincially regulated credit unions will adjust to the new world of lower risk mortgage financing prescribed by the federal government.
First of all, credit unions are very well established and financially prudent lending organizations, so I don’t see any type of land rush so to speak to gain market share from banks and trust companies that fall under federal banking regulations.
But in certain situations and for certain borrowers with strong profiles, credit unions may be able to provide what the banks cannot.
For instance, banks are going to be providing HELOC’s or home equity lines of credit at a maximum of 65% loan to value down from 80%. While some credit unions will adjust to stay right in step with the main line lenders, there are still those that are offering HELOC’s from 65% to 80% loan to value.
Once again, not everyone may be able to qualify for this and its unclear if the opportunity to secure a higher HELOC through a credit union will continue, but for now it certainly can be an option for some that may gain credit unions some business and borrowers a higher borrowing amount at preferred rates.
The same may also be true for self employed individuals in terms of the manner in which they need to be able to support their earnings, and for still others that are looking to secure a variable rate or a term rate less than 5 years who have to use the 5 year fixed rate to qualify where some credit unions are still using the three year rate.
There is also a strong possibility that credit unions will soon be allowed to operate outside of their current provincial boundaries which could provide program offerings to you in the future that are not currently provided by credit unions in your area, assuming you even have regional or local credit union services available to you.
In the near term, as mortgage holders scramble a bit to get their home financing to fit into the newly minted mortgage regs, there is no doubt going to be more individuals checking out what their local credit union has to offer.
And in cases where strong borrowers are caught by mortgage rules that are inflexible, there may be some very strong options here to consider.
If you’re looking for a bank alternative for a specific financing requirement, I suggest that you give me a call and we’ll go through your situation together and discuss all the relevant options that may be available to you.
Mortgage Refinancing Advice
“How To Get The Best Home Mortgage Refinancing Advice”
If you are considering refinancing your existing mortgage, or want to better understand what a mortgage refinance action is all about and how it may or may not be beneficial to you, your family, and/or your business, then it makes a great deal of sense to seek out competent professional advice.
The good news here is there are a large number of mortgage professionals, be them brokers or agents or specialists, that have a considerable amount of training and experience on the subject matter and who are readily available in virtually all areas to provide assistance.
The challenge is getting the best advice for your particular circumstances which is not going to be automatic when speaking to any form of mortgage professional.
This is certainly not because mortgage reps are trying to mislead you in any way.
The mortgage industry is highly regulated and the standard of conduct on all players and participants is very high.
The issue you need to be concerned with when selecting a mortgage adviser of some sort is how relevant what they represent is to your particular circumstances.
For instance, if you go to a lending institution like a bank, they have very capable individuals that work in the field of mortgages.
They are also paid to meet your needs as best they can with the products they provide.
If they products they provide are not the best fit for you, it may be hard to tell at this point as you are only getting the point of view from an internally focused source of information.
The alternative is to work with a mortgage broker who is arms length to the actual sources of mortgage financing and who may be in a better position to apply more options and bring more considerations to the table than someone who may only be marketing their own products.
So being able to identify and focus in on the most relevant options is certainly a big part of any mortgage refinancing decision.
The other part of getting sound advice is dealing with a mortgage professional who can work through all the different options with you so that the best available options are well understood.
Let’s face it.
You don’t refinance your mortgage every day.
And for most, any mortgage financing decision is going to be one of the larger financing decisions they need to make.
So working with someone that has the experience, knowledge, and teaching skills to help get you comfortable with all the information available is going to be key to making a good solid financial decision that you’re going to have to live with for a while.
This is another reason why mortgage brokers and agents are a solid option for getting advice and guidance.
In most cases, it does not cost you anything to use them, and they come with more of a broad market representation which is beneficial not only from an available program point of view, but from an experience point as well due to the large number of different scenarios and solution sets they work through on a regular basis.
If you’re looking to refinance, or just have some questions, I suggest that you give me a call and we’ll go through your situation and questions together.
Self Employed Mortgage Questions
“Here Are The Most Common Questions We Get About Self Employed Mortgages”
Self employed mortgages are a significant segment of the residential mortgage market.
And over the last number of years there have been a lot of changes take place in how lenders approach this market creating a certain amount of confusion at times among existing and/or potential borrowers.
To make more information available to self employed individuals, we decided to list out the most commonly asked questions we get over and over again about self employed mortgage qualifying.
These are not listed in any type of order.
And there are certainly a lot more questions asked on the subject, but these are the most common ones.
What Are The Main Things I Need To Provide To Qualify For A Self Employed Mortgage?
The key things to qualify are all about the paper work.
The more detail you can provide to support your business existence and earnings the better.
Items like articles of incorporation, shareholder resolutions and agreements, business financial statements, personal income and net worth, and so on are going to be important to building your case for eligibility.
And if income verification is not straight forward, all the more reason to provide a comprehensive income package to the lender right at the time of application.
Because self employment can take on many different forms, its always good to provide as much detail as possible to give the lender sufficient background information to make a decision in your favor.
“Can I Qualify For Mortgage Insurance If I’m
Self Employed?”
Yes, self employed mortgages can qualify for mortgage insurance.
In fact, the mortgage insurance companies have programs specifically designed for the self employed.
More specifically all mortgage insurance programs for self employed individuals fall into two categories, namely income verification and stated income.
Income verification works similar to employed mortgage programs in that the verification is specific to income you report personally for income tax to the Canada Revenue Agency.
Stated income is used when there is not enough personal income declared to meet the debt servicing requirements of the lender’s program.
“Is There Any Difference In Interest Rates And Terms?
There is no difference in interest term offerings for self employed mortgages.
You can get either a variable or fixed rate term provided that you can qualify for them, just like an employed person would have to.
Where there can be a difference is in the premium you may be required to pay for an insured mortgage depending on what type of program you qualify for.
For instance, an income verification program will have a lower mortgage insurance premium than a stated income program.
“How Do I Verify My Income?”
The income verification process is about what you have taken out of your business personally to live on.
So the focus is on your personal income tax return and the notices of assessment provided by CRA once your return has been processed.
Because business results can vary from year to year, which can also influence the funds you take out of your business, a lender could also look at a three year average of personal income to get a better picture of what the average available cash flow for debt servicing actually is.
What Are The Keys To Acquiring
A Self Employed Mortgage?
One key to securing a self employed home mortgage is the manner in which the application is put together and submitted to targeted lenders with relevant programs for your particular requirements.
A complete and thorough application should include as much information about your business as possible so the lender can quickly get comfortable with your financial background and ability to repay the mortgage over time.
Because we are talking about self employed, the lender may not understand the business and any confusion or doubt can lead to a decline.
One of the ways to properly assemble an application package that increases the likelihood of a positive result is to work with an experienced mortgage broker who can outline all the relevant information that should be included for your particular situation.
A mortgage broker with experience securing mortgages for self employed individuals can be a valuable asset to getting the financing you’re looking for.
2012 Mortgage Refinancing Basics
“Here Is The 2012 Version Of Mortgage Refinancing Basics”
While the most of the fundamentals that apply to home mortgage refinancing are always going to be valid, there are changes that take place each year that can impact the refinance process.
So today let’s take a look at what I will call the 2012 mortgage refinancing basics that you should have a good working knowledge of before considering any type of a refinancing strategy.
To start with, the most common reasons today to refinance an existing residential home mortgage is to try and take advantage of lower interest rates, consolidate consumer debt, gain incremental capital for some other purpose, or some combination of the first three.
As we remain in a low rate environment with record levels of average household debt it stands to reason that mortgage refinancing is going to continue to be primarily focused around these two areas individually or in combination.
What Amount Of Refinancing Can Be Secured With An Insured Mortgage?
One of the more significant changes to refinancing considerations relates to mortgage insurance rules.
Over the last few years, the minister of finance has mandated the continued decline of the amount of mortgage financing could be made available for a refinance action, and in July of 2012, the limit has been further reduced to a maximum of 80% loan to value.
While non insured mortgages are also at a max lending amount of 80%, insured mortgages still play a purpose for those individuals who still may not be able to secure a top level rate, even with the 20% equity in place.
But if you’re in need of 85% loan to value from your mortgage funding then you may need to look to a private lender who has the flexibility to consider requests above 80%.
What Costs Are Specifically Related To A Mortgage Refinance Action?
The potential cost items you need to consider when refinancing have not changed in recent years and remain 1) prepayment penalties, 2) appraisal fees, and 3) legal fees.
The prepayment penalty is really the key to determining if a getting a new mortgage in place to pay out the old one makes sense at any given point in time.
If the prepayment penalty is very high, working through the rest of the number may result in you being worse off over time. That’s why its going to be important to contact your existing mortgage provider and get a statement from them of your exact prepayment penalty before you even start considering any options.
And while appraisal fees and legal fees can seem almost trivial in comparison to a prepayment cost, they also need to be factored into the analysis so that you have a clear picture of the cost and benefit of any options you want to consider.
Is It Still Possible To Refinance A Mortgage If You Have Bad Credit?
Yes, you can still refinance with bad credit and in fact there can be even more options for you today than just a few short years ago.
Today there are several sub prime or “B” lender options as well as private lender options available.
The key with bad credit tends to be in estimating the time before your credit will be improved.
If you have some bruised credit that does not allow you to qualify for a new “A” mortgage today, but is expected to be corrected in a year or two, then it may make more sense to leave the existing first mortgage alone to take advantage of its rate and secure a private second mortgage to fill the gap in funding.
Then, when your credit has improved, an “A” credit refinancing can be completed.
This is a good reason why its so important to look at all the options and crunch the numbers to make sure that any mortgage financing decision you make is going to end up being the lowest cost, highest benefit to you.
One of the best ways to accomplish this is to work with an experienced mortgage broker with a solid track record of mortgage refinancings.
If you’re considering refinancing your home mortgage, I suggest that you give me a call so we can go through your situation together and review all the relevant options in detail.
Refinance Self Storage
The Refinancing Of A Self Storage Property Can Provide A Number Of Commercial Mortgage Challenges”
Today we are going to cover what I find to be some of the main challenges that borrowers and property owners experience when they attempt to refinance a self storage unit or property.
By being able to proactively address these issues before even applying for a new commercial mortgage, you’re going to be more likely to get the financing you’re looking for in the time frame you’re working in.
The first main challenge is the quality and strength of the financial statements that are provided by the tenants.
This is extremely important when you’re trying to refinance a construction mortgage where you most likely only have partial occupancy at the point at which construction is complete.
The lender is going to focus in on cash flow, and if you have recently opened your doors to the public, you may only be at 50% occupancy or less, which is not likely going to provide enough cash flow to provide adequate debt servicing for a long term mortgage. Yes, the projections can likely demonstrate repayment once occupancy is increased. But from a lender’s assessment of risk, they are going to be concerned as to when you will actually be able to achieve the planned level of average occupancy.
A second major potential challenge is the commercial appraisal.
Because a self storage property is income producing, one would think that the appraised value would predominantly be based on the income or cash flow generated now and in the future.
That’s not always the case due to the fact that there can can significant cash flow swings in self storage as a result of average occupancy periods being short in duration. As a result, appraisers will tend to lean towards a cost assessment of value instead which can result in a lower market valuation for the purposes of commercial mortgage financing.
The potential consequences of this is that you might not be able to get the amount of mortgage funding you require to retire the existing mortgage and potential provide additional capital for other purposes if that was part of your reason for refinancing in the first place.
This leads into the next challenge which relates to trying to increase the amount of mortgage funding to generate funds for other purposes.
With “A” mortgage lenders, there can be a high level of focus on the use of funds for a new mortgage. If you are increasing the mortgage amount on a self storage property and are planning to reinvest it into the property, thus increasing its market value, then its more likely that particular utilization of mortgage proceeds will be acceptable to an “A” lender.
However, if you’re looking at taking the funds out of the equity in the property and utilizing the money for an unrelated activity, such as starting up another self storage facility, or consolidating other debts, then its less likely that an “A” level commercial lender will approve that application of funds.
This may require you to focus more on sub prime commercial lenders or private money lenders that are less concerned with additional mortgage proceeds being applied elsewhere. These secondary financing sources will likely come at a higher cost of financing, but may still be worth it if there is enough benefit gained from being able to have more flexibility with the use and application of incremental mortgage proceeds.
If you are considering refinancing a self storage facility or require a refinance action right away, I suggest that you give me a call so we can go through your requirements together and discuss the different financing options that may be available to you.