All posts by Joe Walsh
Retail Property Financing
“Retail Property Financing Available From Our Commercial Mortgage Lenders”
Today we’re going to talk about retail property financing for structures such as strip malls, plazas, big box stores, and so on.
When institutional lenders are considering a retail building mortgage application they immediately are going to focus in on things such as the location, the strength of the retail rent and lease market in that area, the strength of your tenant rent roll if you are renting, or your business financials if you are self occupied.
Commercial mortgage lenders that will look at providing financing for a retail building will typically fall into one of three different categories.
The first category would banks and other institutional lenders. While the cost of financing is going to be the lowest from this group of commercial lenders, the lender requirements are also going to be the highest to assure that rate and risk are in proportion.
The second category of commercial mortgage lenders for retail building financing would be sub prime or quasi institutional lenders such as investment banks, hedge funds, and other forms of organized investor capital interested in commercial real estate financing. This form of financing is ideally suited for those applicants that are just below the requirements of bank financing, or for applicants that are not going to have sufficient time to complete or meet the lending and funding requirements of a bank or institutional lender in the time that the applicant has to work with.
The rates for a sub prime retail building mortgage are going to be slightly higher, but the requirements are also going to be less stringent as compared to an institutional lender.
The third category of lender for retail property loans is from private mortgage lenders, which are effectively short term bridge loans to deal with some combination of tight timelines and funding constraints that can’t be satisfied by the first two categories of lenders.
Application Process And Timelines
For Completion And Funding
The application process is going to include a general disclosure of business owner information, financial statements, appraisal reports, environmental reports, rent rolls, tenant profiles, and anything else that is relevant to a particular situation.
Even though an “A” lender may require more information, fundamentally all lenders will require the primary information listed above. Sub prime lenders and private lenders may be more flexible in working with the information provided which can result in funding approvals that may otherwise not be possible with a bank or institutional lender.
The timelines to completion from application to funding will typically fall in the 30 to 60 day range. This can also go beyond 60 days if additional time is required to get third party reports in from accountants, appraisers, consultants, etc., as each of these service providers will be working within their own work schedules which may not always correspond with your own planning timeline.
Keys To Retail Property Financing Success
The two main keys to retail building mortgage financing is to 1) make sure you have sufficient time to work through the process, and 2) work with an experienced commercial mortgage broker who can get you working with the most relevant lenders as quickly as possible so that you are able to meet your funding requirement in the time you have to work with.
If you require retail property financing, I suggest that you give me a call so we can go through your requirements together and discuss different commercial mortgage options that are available to you.
Click Here To Speak Directly To Commercial Mortgage Broker Joe Walsh
Office Building Financing
“Office Building And Professional Building Mortgage Financing”
Office Building mortgage financing or Professional Building Mortgage financing can be placed through a wide variety of lenders, depending on the specifics of any particular application.
Each lender is going to have their own lending criteria, but for the most part, all commercial mortgage lenders that fund office buildings are going to pay close attention to the age of the building, location of the building, and the rent roll or tenant lease contracts in place or expected to be in place in the near future.
For the lower interest rate business real estate loans, lenders are looking to see that the tenant lease terms match up to the interest term being sought. The quality of the tenant can also be very important in terms of their credit and financial stability that will increase the probability that they will be able to pay their rent on time through out the lease term.
Vacancy rate is also a key consideration as well as the marketing plan in place or to be put into place to reduce existing vacancy.
Lender’s will also look at the average market rent for similar buildings and prefer funding deals where the professional building in question is at or very near market rents as well. When landlords provide leases below market rent, there is a risk that if the tenant were to leave that it may be difficult to replace that tenant at market level or even at the discounted level the previous tenant was at, depending on the vacancy level in the building and the space availability in the area.
That all being said, different scenarios will qualify with different lenders and different lender categories.
There Are A Number Of Different Office Building Mortgage Financing Options Available
If a particular application package cannot qualify with a bank or institutional lender, then there are sub prime options that will be slightly more expensive for the most part, but also somewhat easier to qualify for.
And if short term financing is required to complete a purchase or meet a deadline that would not allow the financing process to be completed with an institutional lender even if the borrower would qualify, private mortgage financing can be a good option to get funds into place quickly, providing you with time to arrange your preferred longer term mortgage funding option.
The office mortgage loan financing options you consider will also be a function of the time you have to work with.
For instance any bank or institutional lending deal will require 30 to 60 days to close and its not unusual for the time period from application to funding to exceed 60 days. This is largely due to the amount of third party information the lender will require from the likes of accountants, commercial property appraisers, environmental consultants, and so on. Each of these third party providers will have their own work schedules to manage which can cause delays in getting your requests completed in the time you have to work with.
When the available time is 30 days or less, then private commercial mortgage financing is likely going to be the best option. This is short term financing which typically only covers a term of one year, but can be a key commercial mortgage financing component to acquiring a property, refinancing an existing mortgage, consolidating debt, or funding construction and/or renovation work.
The key to getting an office building mortgage or professional building mortgage in place is focusing in on the right commercial mortgage lenders with a solid information package.
Its easy to waste considerable amounts of valuable time focusing in on lending sources that have a low probability of being able to fund your deal.
In order to increase your probability of success with office building financing, you should consider utilizing the services of a commercial mortgage broker who can help guide you through the market in terms of who can fund your deal at the point of time you require financing as well as putting together an application package that will proactively answer the questions of interested lenders.
If you have an office building or professional building that requires financing either for purchase, refinance, or construction, I suggest that you give me a call so we can go through your situation together and discuss different commercial mortgage financing options potentially available to you.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Hotel Property Financing
“Hotel Property Financing Available From Different Categories Of
Commercial Mortgage Lender”
For hotel property financing from a commercial lender, the key criteria for lending is going to start with cash flow, followed closely by vacancy rates and the seasonal use patterns that impact the cash flow of the hotel operation.
Other key lender requirements can revolve around the type of hotel and category. For instance is the hotel property under the flag of a national or international hotel chain? Is the hotel classified as a three, four, or five star hotel? Is it linked into a national reservation system and so on.
Each type of lender will have their own lending/funding criteria related to hotel financing, making it critical to be applying to a funder that is interested in your particular hotel profile.
Lender Categories For Hotel Commercial Mortgage Financing
When it comes to hotel property financing, there are basically three lender categories that can be looked at.
The first category, or lowest rate category would be a bank, credit union, or other form of institutional lender which could include life insurance companies, trust companies, pension plans, and so on.
While category #1 will provide the best rates on the market, their financing requirements will also be stringent and difficult to qualify for at times.
The second lender category for hotel financing is would be more of a “B” lending category where the financing target of the lenders are hotels that cannot quite qualify with a bank or institutional lender.
This group would include quasi institutional lenders such as investment bankers, hedge funds, and other forms of investment funds.
The rates will be slightly higher, but lending requirements also not as rigid as you will find in the lower rate lender category.
The third category would primarily include private mortgage lenders which could range from an individual investor to a mortgage syndicate to a mortgage investment corporation.
Once again, the rate is going to be higher than what you would get from a bank or institutional lender, but the qualifying criteria will also be easier to achieve.
Private commercial mortgage financing can be an excellent source of short term funding for a hotel property.
Hotel Financing Application Process
The application process for securing a commercial mortgage on a hotel property is going to start with a completion of a standard application that clearly outlines the ownership of the hotel as well as the guarantors for the proposed mortgage.
Most commercial mortgage lenders are going to want to see at least three years of accountant prepared financial statements as well as three years of operational data to clearly understand the room and service pricing, vacancy rates, and so on. The property will require an AACI appraisal as well as an environmental audit. Financial projections will be required for the next three to five year period with all assumptions clearly outlined.
If the hotel has a marketing plan, this would also be useful for assessing the business viability of a funding application.
The resumes of the owners and managers will be required to better understand the experience that is available to the business.
There can be several other lender requirements in a hotel financing application, but the above items represent what would be required in any application.
Timelines For Completion Of A Hotel Property Financing Application
The average time of completion from the point of application to funding typically ranges in the 30 to 60 day range. The process timeline can extend even further depending on the amount of time it takes to receive all the third party requested documentation such as financial statements and appraisals.
Depending on the area and time of year, third party experts such as accountants, appraisers, and consultants may have a back log of work which can take them longer to complete your requirements.
This is another reason why the process for hotel financing should be started as soon as possible so there is plenty of time to fully explore all the relevant commercial mortgage financing options available to you.
Best Approach For Securing Hotel Property Financing
Compared to other forms of commercial property financing, a hotel finance solution is one of the more complete to arrange due to the fact that the lender or funder needs to assess both the hotel property and the business operating within it.
Commercial mortgages for tenanted properties can be much more straight forward to assess in terms of the cash flow and debt servicing requirements now and in the future.
From a lender point of view, it can also be hard at times to identify which lenders are funding hotel applications and what their lending/funding requirements are.
Commercial mortgage lenders typically are in and out of this market, depending on the strength of the economy and the strength or weighting of their portfolio.
As a result, its easy to waste valuable time working through an application with a lender that has a very low probability of actually funding your deal at the point in time you require funding.
So from both a application complexity and positioning point of view, and lender market understanding, it can make a great deal of sense to work with a commercial mortgage broker who has a good understanding of the market place an is experienced in putting an effective application package together for any targeted commercial lenders.
If you have a hotel property financing requirement for acquisition, construction, or commercial mortgage refinancing, I suggest that you give me a call so we can go over your situation in detail and review commercial mortgage financing options that available to you.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Both Sides Of A Collateral Mortgage
“A Collateral Mortgage Charge
Pros And Cons”
Collateral mortgages are getting more air play as some of the main line mortgage lenders are slowly or quickly moving to them.
Unlike a standard mortgage that results in a charge being placed on the property title, a collateral mortgage is actually a promissory note with a lien registered against the property.
In the past, collateral mortgages in the mortgage financing world were mostly used with secured lines of credit, but now there is a greater interest in using them with conventional mortgage lending.
The reason for this is two fold. First, because normal regulatory limitations on loan to value do not apply, a mortgage lender can register a lien for an amount greater than the property value, at a rate higher than current market rates. This allows the lender to be able to provide additional advances as well as increases to rate during the life of the mortgage without having to pay out the existing mortgage or re-register mortgage security.
So on the one hand, the collateral mortgage provides borrowers with potentially easier access to future borrowings at lower mortgage placement costs. On the other hand, the collateral mortgage also serves as a barrier to the lender to get a second mortgage from a different lender as the collateral charge will not provide any security value to another lender, regardless of the amount of money owing on the original mortgage.
As a mortgage tool, the collateral mortgage and be a great fit for a borrower, provided they understand how it works and the benefits it does offer are things that the borrower thinks they may be able to take advantage of in the future.
That being said, a lack of full understanding of how the collateral mortgage will function can cause problems down the road, especially if the borrower is not able to qualify with their existing lender for incremental borrowing at a time when funds are required.
But even if incremental funds cannot be secured, the borrower can still take advantage of the prepayment options provided in their collateral mortgage, refinance with another mortgage lender and discharge the collateral mortgage in the process. This will incur incremental legal costs and in most cases a collateral mortgage cannot be relocated to another lender so a new mortgage will need to be underwritten and charged on title.
The best course of action to find out more about a collateral mortgage or a specific mortgage program that may or may not have a collateral mortgage charge associated with it is to work with an experienced mortgage broker who can serve as an independent adviser to you for no cost in most cases.
Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh
Commercial Mortgage Appraisal
“Commercial Mortgage Appraisal Watch Outs And Considerations”
Commercial mortgage appraisals are a critical part of getting a commercial property in place.
And depending on the scope of a given commercial property appraisal and the activity or demand for commercial appraisals in a given area during a given time period, the completion of a commercial property appraisal can take several weeks or even months to complete and can add considerable time to the commercial mortgage application process.
A commercial real estate appraisal can also come with a significant cost to complete, so time and money are both going to potentially come into play.
As a result, there are a number of watch outs and considerations for anyone applying for a commercial mortgage.
First of all, most mortgage lenders will have their own accepted or approved list of commercial property appraisers. Any appraisal presented to them that was completed by an accredited or non accredited appraiser from outside their list will not be considered.
This creates a bit of dilemma in that some property owners, knowing the amount of time that it can take to get a commercial appraisal completed, will want to get an appraiser working on their property prior to even applying for financing.
This is truly a risk in that if the appraiser selected is not on the approved list of the lender you’re trying to work with, the appraisal may have to be redone which is going to take time and money. That being said, if you have a good idea of the lender or lenders that you are likely going to be working with or applying with, you can do some checking and find the appraisers that are approved on all or most of the targeted lenders’ lists.
A second challenge with commercial mortgage appraisals is that they are going to have to be made out directly to your targeted lender, even though you are paying for them. As a result, the commercial lender will get a copy of the appraisal, but you may not. This is something you will want to discuss in advance with any lender you want to apply with if you will want a copy of the appraisal for your own use and potentially have one or more copies of the appraisal sent on to other lenders if your financing request is not approved.
The lender may also have an agreement with their approved appraisers that any appraiser they receive from a given appraiser cannot be re issued for a period of time, say 60 days. This restricts the amount of shopping you can do with a completed commercial appraisal.
Third, it can be a good idea to find out how busy the appraisers in your area are at a given time. There can be periods of time when commercial activity is high that it may take a month or more before an appraiser can even start working on your file. Because there are significantly fewer certified commercial appraisers than residential, the demand for appraisal services can outstrip the available supply, and when you further limit your choices to lender approved appraisers, there can be a considerable back log in getting the work completed.
Of all the aspects that can go into a commercial mortgage, the commercial real estate appraisal can be the most difficult to accomplish and can add the most time to the overall process, which speaks to the need to closely manage this requirement, even before you formally apply for commercial property financing.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh
Mortgage Prepayment Disclosure
“Mortgage Prepayment Disclosure
Set To Get Clearer”
By November, 2012, all mortgage lenders governed by the department of finance are going to have to provide more clear and concise mortgage prepayment penalty information which will need to include how the calculation will be made, calculation sheets for borrowers to utilize, where to find the different inputs into a calculation, and even how to prepay the mortgage without incurring a prepayment penalty.
This move has been promised for the last two years by the department of finance and now its finally coming into practice.
While greater transparency is welcomed by all mortgage holders, some would argue that the finance department has not gone far enough and in fact should require all mortgage lenders to follow a completely standardized prepayment penalty policy and calculation.
The argument against this is that each lender has a different set of costs they are trying to protect themselves against, and forced to follow a single prepayment policy, there could end up being higher rates in the market place and a reduction in the number of different mortgage programs that exist in the market today, which effectively is a reduction of choice to the consumer.
And while a standardized prepayment policy and payment is not likely to be legislated any time soon, the implementation of more transparent prepayment language is definitely a step in the right direction and will provide consumers not only with better tools to avoid prepayment penalties, but to also make better decisions with respect to selecting a mortgage in the first place as prepayment penalty is typically one of the least focused on an understood aspects of a mortgage contract.
But even with greater disclosure, potential prepayment calculations can still be difficult to understand fully. Which is why its always good to work with an experienced mortgage broker who can help you compare and fully understand the potential prepayment penalty that you could be facing with different mortgage options you are considering.
There can at times be a trade off between rate and prepayment in order to meet your preferred mortgage repayment strategy, so its definitely a good idea to go through the exercise of fully understanding this item before signing up for any mortgage program.
If you would like to better understand your prepayment options for a mortgage you have right now, or for a mortgage you are looking to get in place, I suggest that you give me a call so we can work through the lender’s prepayment policy and calculation together and help you determine which course of action makes the most sense for your situation.
Click Here To Speak Directly To Toronto Mortgage Broker Joe Walsh
Private Mortgage Pricing
“Private Mortgage Pricing Is Based On Risk And Speed”
Private mortgage pricing tends to be a combination of risk and speed for most private lenders.
Some private lenders will require a higher cost of funds and as a result, they must gravitate to the area of the market that will provide that type of return.
On the other end of the spectrum, there are private lenders that are very risk averse and will provide funds at rates close to what banks and institutional lenders will provide, but the risk needs to be very low and the the borrower needs to be prepared to go through a longer due diligence process.
Private mortgage pricing is an often miss understood area of private money lending.
The most common point of view is that private money is going to be priced at 10% or higher for first mortgages and 12% or higher for second mortgages.
And while this might be true in terms of the averages, there is a wide range of values around these numbers that can apply to a variety of funding scenarios.
If you have the time to go through the application process, and do not require a high loan to value ratio on good, solid, marketable property, the private mortgage pricing range is more likely to be in the 6% to 8% range for a first mortgage.
But if you’re in a hurry and need funds in a matter of days, then the pricing can get into the 12% to 14% range for first mortgages.
Every private lender also has their own unique way of looking at the market, pricing risk, and determining what they want to get for a return on any particular deal.
So the key here is finding the right fit for any one particular deal and being prepared for the pricing range the deal is likely going to fall into based on risk and timing.
The best way to accomplish private mortgage placement is through an experienced mortgage broker who can quickly assess your situation and put you in touch with private lenders that fit your needs.
Trying to locate private money on your own can not only be difficult to accomplish, it can also result in a less than ideal borrower/lender fit.
If you want to know more about private mortgage pricing for a current or future residential or commercial property financing requirement, I recommend that you give me a call so I can quickly go over your situation with you and discuss private mortgage financing options available to you.
Majors Moving To 2.99
“All 5 Major Banks Now Have A 2.99% Fixed Mortgage Rate Product”
Following BMO’s move to a 2.99% 5 year fixed mortgage rate, the other 4 major banks in Canada have announced a 2.99% fixed mortgage rate as well, but only for a 4 year term.
The news comes on the heels of news reports over the last couple of weeks that consumer spending is viewed by many economists as being too high, and that the housing market is slowing down.
Being that the mortgage market is a good portion of bank earnings, and is a highly competitive market, this latest move appears to be showing us that all the major banks are prepared to fight hard to maintain their market share and potentially grow it in the “A” business space by taking it away from smaller competitors that are not pricing as aggressively, at least not yet.
Even though BMO is offering an additional year on their 2.99% rate, there are differences in their total offering from what the other majors are offering over their 4 year programs.
So as always, when looking at the best mortgage option in the market place, you should be considering both rate and terms for any specific program and from there make an informed decision as to which one provides the best fit for your requirements.
Its hard to know how long these rates will last or what’s coming next in both the commercial mortgage and residential mortgage markets, especially with the continued pressure and uncertainty in the global financial markets.
But for right now, 2.99% is hot rate for consideration and is now becoming differentiated by the non rate program offerings of the 5 major chartered banks.
To find out more about determining which of the available 2.99% fixed rate mortgage programs are the best fit for your current financing requirements, please give me a call so we can go over your situation together and review each of the programs in detail in order for you to be in a position to make the best decision in the time you have to work with.
Commercial Site Development Financing
“Commercial Site Development Financing Can Be Very Sensitive To Location”
Commercial site development financing typically will depend a great deal on the location of the development as well as the type and structure of the development.
For instance, here in Ontario, there is a lot of site development financing available, but most of it will not venture beyond the boundaries of the Greater Toronto Area or GTA.
The same is true in other parts of the country where construction financing sources tend to focus heavily on the major metropolitan centers.
The reasons for this are fairly obvious.
Within larger markets, the ability to successfully exit a project in the event of borrower default is going to be higher in a larger market than in a smaller one, all other factors being equal.
And when you have markets like Toronto, Vancouver, Calgary, and Edmonton where the real estate activity is high and and growing, there is likely going to be more opportunities not only for the borrower to be successful with their project through resale of lots, but also for the lender in the event that the project stalls out for some reason.
This is not to say that commercial site development financing cannot be secured in solid communities that are outside of the main population centres, but the process for locating proper financing and getting it in place can certainly be a lot harder to accomplish, taking more time and money to complete in many cases.
The sources of site development financing that will look at projects in more rural or less populated areas can also be hard to locate as many of them will work through broker networks when originating and placing development financing.
The challenges will even relate to locations where the population is at or near hundred thousand so its not safe to assume that just because the project is well designed and a good fit for the local market that it will be easy or straightforward to get the commercial site development financing you are looking for.
If you’re planning out a commercial site development project either for lot development for resale, or internal use, or you’re in the middle of a site development project that still has a financing requirement, I suggest that you give me a call so we can go through your requirements together and discuss different construction development financing options that may be available to you.
Retirement Home Loan Financing
“Retirement Home Loan And Mortgage Financing For Purchase, Renovation, Construction, And Refinance”
Retirement home loan financing in the form of a mortgage registered on real estate is available from a number of our lending sources.
One of the things that bodes well for these types of commercial propertyfinancing applications is that retirement homes, facilities, and communities are a growth industry with supply not always keeping up with demand in all geographies.
This is a good thing from a borrower point of view as there is considerable interest among lenders to provide retirement home mortgages and loans.
That being said, each situation will have its own unique aspects, which will ultimately determine the specific lenders that will be interested in financing the deal.
Like any type of commercial property financing application, retirement home financing is going to take some time and effort to arrange in order to meet all the requirements of an interested lender.
This is also why its going to be important to be contacting and working with lenders that are the most relevant for a given retirement home loan request, otherwise a considerable amount of valuable time can be lost going through the application process for a lender that may only be marginally interested, or has lending/funding criteria that inevitably will be too difficult for the borrower to meet.
Retirement home lenders will also have different focuses when it comes to the different types of potential financing requirements.
For instance, a lender that will provide construction financing and short term bridge loans to a retirement home project may not have any interest in providing long term financing for a purchase or mortgage refinancing. And if you are looking at financing multiple steps such as purchase, renovation, and then long term mortgage refinancing, this may require coordination with more than one lender as each stage may require a different financing facility.
Lining up multiple lenders is of course doable, but more challenging, especially when it comes to hitting all the milestones in a project timeline.
This is why it makes a great deal of sense to work with a commercial mortgage broker who can first accurately assess the requirements of the project and then get you working directly with the most relevant retirement home financing sources as quickly as possible.
If you have a retirement home loan financing requirement right now, or will have in the near future, I suggest that you give me a call so we can go through your requirements together and discuss different financing strategies available to you.
Nursing Home Financing
“Nursing Home Financing For Purchase, Expansion, Construction, and Refinancing”
Nursing home financing can be required for a number of different applications including financing a purchase, a facility expansion, new construction, or refinancing and existing nursing home mortgage that may or may not require incremental capital for debt consolidation.
For each type of nursing home financing application and geography, there are going to be different lender solutions potentially available in the market place.
As an example, a well established nursing home with solid cash flows can acquire mortgage financing directly from “A” lenders provided that the loan to value fits within their criteria.
Some “A” lenders will require the nursing home owners to acquire mortgage insurance to help cover off the risk of loss for deals up to 85 loan to value.
When nursing home properties cannot quite cover off the debt servicing requirements of “A” lenders, there is also a secondary market that can be available to the borrower to secure financing at slightly higher rates.
In cases where there may be slightly lower cash flow, the lending risk can be offset by larger equity in the property, further protecting the lender from any potential future loss.
With respect to construction, depending on the specific requirements for the project and funds available to invest, nursing home construction financing solutions can come from bank or institutional lenders, sub prime lenders, and private mortgage lenders.
The key in all cases is to clearly understand the requirements of the borrower and the project and then match them up with the most relevant nursing home financing options available on the market.
The best way to do this in most cases is to work through a commercial broker who has access to variety of different lenders that would potentially be interested in debt financing for a nursing home property.
If you’re starting the process to look for nursing home financing, or are in the middle of a project and have an immediate need, I suggest that you give me a call so we can go through your requirements together and discuss potential nursing home mortgage loan financing options available to you for your consideration and review.
Click Here To Speak With Commercial Mortgage Broker Joe Walsh For A Free Assessment Of Your Options
Land Servicing Loans
“Providers Of Land Servicing Loans Primarily Focus On The Value Of The Land And The Exit Strategy For Repayment”
We arrange land servicing loans for our clients in Toronto, the Greater Toronto Area, and parts of Southwestern Ontario.
While there is a considerable list of items that a lender for land servicing will focus in on, the primary areas of initial interest are the current fair market value of the land and the exit strategy that will drive repayment of the loan.
With respect to market value, its not uncommon for a particular development to be in the middle of a planning process with either a draft plan of subdivision in place or something that would resemble the same.
In these situations, the construction financing source is going to be looking to determine what the value of the land is today in the current state of planning, what the land is going to worth when final plan approval is in place, and what it will be worth upon installation of services.
For installation of services, if there are multiple phases of construction, unless all phases are going to receive land servicing at the same time, a commercial appraisal should reflect the market value of each phase individually versus providing a market value for the entire development once services are installed.
This is due to the fact that lenders will likely structure their draws to align with phases of development and want to know that at each completed phase that the property has appreciated in value sufficiently to provide the security they require to move forward with further advances.
At the other end of the equation is the exit strategy to repay the loan in the future.
All land development exit strategies are going to involve the resale of all or part of the property requiring the land servicing loan, so the strength of the exit strategy has a lot to do with who the potential buyer or buyers are, and how strongly they are contractually committed to a purchase once land servicing is completed.
Taking this one step further, in situations where there a single builder prepared to acquire lots over a period of time, the financial strength of that individual company will be extremely important to any lending/funding decision.
While not automatically the case, more arranged buyers or conditional sales to financially strong buyers, presents a stronger, lower risk exit strategy to potential lenders.
Once again, there are many other aspects of the development that a lender will focus in on, but if the market value and exit strategy cannot support the deal, the other factors will not make much difference.
If you require a land servicing loan, I suggest that you give me a call so we can go through your requirements together and discuss potential land servicing loan options available to you.
Mortgage Financing For The Self Employed
“Self Employed Mortgage Financing Programs Have Suddenly Become More Difficult To Acquire”
Self employed mortgage financing has evolved considerably over the last decade with most major lenders and many second tier mortgage lenders offering different types of self employed or stated income mortgages to self employed individuals who could not easily provide support for their annual income as compared to an employed person with T4 slips and pay stubs.
With some stated income approaches, the applicant was basically signing an statement of what their annual income was.
Certain other lenders were doing stated income mortgages under insured programs.
Much of this changed in the first week of February, 2012 when mortgage lenders altered or removed their stated income programs altogether.
There are a number of reasons for these changes, including some potential changes to lender access to CMHC insurance for these types of deals.
Regardless of the why, the reality is that if you are self employed, or cannot support proof of repayment of a mortgage through employed earning documentation, then, for at least the time being, its going to be more challenging to get a self employed mortgage approved.
That being said, the higher the equity in a property and the stronger the credit profile and net worth of the applicant, the less likely these changes are going to impact them.
But for the more common scenarios where stated income declarations and/or mortgage insurance were required to get financing in place, the process for locating and securing mortgage financing is now going to be a bit more challenging.
For instance, most of the lenders that were doing stated income are now requiring a greater degree of financial proof of earning and over a longer period of time, say three years on the average.
So its going to be more important to be able to have supporting documentation to show you have generated sufficient funds as a self employed person, regardless of how it gets reported for tax purposes, to service a given mortgage amount. And the manner in which this is further assessment is performed can vary from lender to lender as well.
If you are in need of a self employed mortgage, or would like to better understand your options and how to go about the process of acquiring one, I suggest that you give me a call so we can go over all the changes in the market together and review different approaches for meeting your mortgage requirements.
2.99 For Rentals Too
“The New 2.99% Mortgage Rates On 4 And 5 Fixed Terms Are Available On Rental Properties”
The new lower fixed terms mortgage rates on the market at 2.99% for a five year stripped down fixed mortgage and a 4 year fully loaded fixed mortgage are also available for rental properties.
I’ve been getting this question a fair bit in the last two weeks since the the 2.99% five year term hit the market place.
And if you are an investor with rental properties, the programs that are out can be utilized for rental property mortgages, provided that any one specific rental property meets the rest of the lending and funding criteria of the lender.
This is great news for rental property investors as they too have the ability to potentially lower their capital cost and increase the profitability of these properties.
With more lower rate programs expected in the short term, its likely there will be even more market choices to consider before too long.
If you have a rental property that you would like to better understand your rental mortgage refinancing options to take advantage of these lower rate fixed term programs, I suggest that you give me a call so we can go through your situation together and discuss the different options that are relevant to your situation.
2.99% Mortgage Rate
“The Market Is A Buzz With The New 2.99% 5 Year Mortgage Rate”
The mortgage market has started off 2012 with a bang with BMO leading the way with their 2.99% fixed rate five year residential mortgage.
Added to that the news last week that the Bank of Canada will not change the overnight lending rate which has been sitting at 1% for the last 16 consecutive months (new record), and all near term indications are that rates are going to stay where they are, or perhaps even go lower in the short term.
The advertising of the 2.99% mortgage rate has taken the market by storm with lenders, brokers, and consumers getting caught up in a major mortgage product offering a still lower rate than we’ve gotten used to over the last number of years.
But while the rate is exceptional, the overall mortgage product does come with its limitations.
First of all, this is a closed mortgage with an annual prepayment option of 10% when the industry average is 20% per year.
This mortgage product has other stripped out features that are common in most other BMO residential mortgage products.
But lower rates, mean lower risk, so its not uncommon, and even expected that the lowest rate offerings on the market are going to have mortgage feature trade offs to consider.
That being said, if you can work with the 5 year term as written, then this is an excellent rate which is going to be in place for a full 5 years, regardless of what happens in the mortgage market place during that same time period.
In keeping with the cost benefit argument, we also currently have at our disposal a 2.99% mortgage rate product for a term of 4 years where many of the aforementioned standard mortgage features are not stripped out of the product.
So for those of you who are looking at a great rate and all the bells and whistles, this is a great product to consider for a new home purchase or a mortgage refinancing scenario.
Even though the market place is blessed with a large cross section of mortgage products, each lender is trying to differentiate themselves in the market to some degree, so its important to be able to understand not only the selling features of any given mortgage product, but also how they will be applied in real time once you have a mortgage in place.
Therefore, we always strongly advise that you work with an experienced mortgage broker who can go through the mortgage programs most relevant to your requirements, and take the time to help you clearly understand the trade offs from one product to another as well as how each product may impact you projected financial planning.
If you’re interested in learning more about these lower interest rate mortgages on the market, I suggest that you give me a call so we can quickly go through your requirements and discuss mortgage programs that are the best fit for your needs.