All posts by Joe Walsh
Standard Charge Terms
“Make Sure You Clearly Understand Both Borrower And Lenders Responsibilities Before Signing A Mortgage Contract”
When you accept a mortgage offering from a mortgage lender, you are also accepting the standard charge terms created by the lender and outlined in the mortgage contract.
The standard charge agree outlines the rights and responsibilities of the borrower during the time the mortgage is outstanding.
Failure to comply with all the listed requirements can put the mortgage into default, allowing the lender to exercise their rights which are also outlined in the document.
Once the mortgage contract is signed by the borrower, the borrower agrees to and promises to uphold each of obligations or covenants that are outlined in the mortgage contract.
Here are a list of the basic mortgage covenants that are likely to appear in the standard charge terms that a borrower will need to sign to receive mortgage funding.
- Loan Repayment. The borrower agrees to repay the loan based on the repayment schedule that is outlined in the mortgage contract.
- Property Insurance. The borrower promises to keep adequate property insurance in place in order to protect the value of the real estate and concurrently protect the lender from any loss due to fire or other event that would damage the property and reduce its value.
- Property Maintenance. The borrower agrees to keep the property in a good state of repair and basically maintain it in a good saleable condition.
- Waste Management. The borrower agrees to not perform an actions or conduit that would result to waste being present on the property which could create damage to the property.
- Property Taxes. The borrower agrees to pay all property taxes in full and when do. If the borrower fails to pay the property taxes, the lender can pay them for the borrower and then add them to the total balance owing.
Failure to comply with any and all of these covenants will result in the lender considering the borrower to be in default at which time the lender can exercise its rights which have been agreed to by the borrower when the mortgage contract was signed.
The lender also has a number of covenants that they must agree to as well.
- Certificate Of Discharge. Once the borrower or mortgagor has paid off the mortgage in full, the lender or mortgagee is required to provide the borrower with a certificate of discharge to officially communicate that the mortgage was paid in full.
- Assignment Of Mortgage. The borrower has the right to assign an outstanding mortgage to a new lender, provided the borrower or mortgagor is in good standing and that the borrower has the right to redeem the mortgage.
- Provide Quiet Possession. Other when in situations of default, the law provides the borrower with the right of quite possession which basically means the borrower can possess the property without any interference from the lender or mortgagee.
While the above borrower and lender covenants are going to be standard in just about any mortgage, the important thing to understand is your obligations as a borrower and the rights of the lender that you are agreeing to on signing.
You may not be able to alter any of these covenants or requirements, but you do need to understand them and comply with them in order to avoid the lender taking action against you in a situation of covenant default.
Toronto Construction Mortgage Broker
“A Toronto Construction Mortgage Broker Can Provide Access To A Variety Of Construction Loan Financing Options”
A Toronto construction mortgage broker can be a great asset to a construction project in a number of ways.
First, and foremost is the ability to connect builders, developers, and property owners with relevant sources of construction financing. When we speak of relevant sources, we’re talking about lenders that are going to be highly interested and competitive when looking at a specific construction project financing request in a specific geography for a specific borrower profile.
There are basically three different categories of construction financing and within these categories will be different lending and funding requirements from one lender to another.
At the lower cost end of the spectrum is construction loan provided by banks and institutional lenders. The key with this type of financing is making sure you are able to properly qualify for it which is another area where a Toronto construction mortgage broker comes into play.
In what we will call the mid market for construction financing are the sub prime construction lenders or quasi institutional lenders which can include investment bankers, private mortgage funds, and so on. The cost of financing is going to be slightly higher than a bank, but the qualifying terms and draw advance requirements not as complex in most cases.
At the other end of the construction financing market is private mortgage lending, which will likely be higher cost than the other two, but come with a greater degree of speed and flexibility with respect to loan qualifying and draw administration.
Once again, each of these lender categories have their own unique fit and getting the right borrower to lender match can be key to successful cash flow management in any construction project.
So not only can an experienced Toronto Construction Mortgage Broker introduce you to suitable lenders from each of these categories, they can also help you establish which lender offering will be the best fit for your project at a given point in time.
Another major benefit of working with a Toronto Construction Mortgage Broker is having the ongoing support available to you during the project to deal with any lender funding issues that may arise.
Draw management at times can be complex and its not unusual for issues to arise that can slow down draw advances or even see draws reduced. Having a good construction mortgage broker on your project team will help increase the likelihood that these issues will be resolved quickly if they do arise, and that the impact on the project will be minimized.
If you have a construction project you’re currently planning or are in the middle of in Toronto or Southern Ontario, I suggest that you give me a call so we can quickly assess your situation and provide construction financing options for your consideration.
Click Here To Speak With Toronto Construction Mortgage Broker Joe Walsh For A Free Assessment Of Your Construction Financing Options
Understanding Closed Mortgage Prepayment Options
“Depending On The Lender, Closed Mortgage Prepayment Options Can Mean
Different Things”
In the most technical of definitions, a closed mortgage prepayment option would only exist if there was a bona fides arms length sale of the property.
Outside of property sale, there basically are no options for full prepayment and the borrower is going to required to continue on with the mortgage until the end of the term.
Depending on the lender, partial prepayment in different forms may be an option such as increasing the mortgages periodic payment or making lump sum payments from time to time.
The key point in discussing this is that the term closed mortgage is often used to explain a mortgage with a fixed interest rate.
In many of these situations, there are prepayment options available to the borrower.
So its going to be important to clearly understand the prepayment options that are available on any mortgage option in order to avoid any problems down the road.
While the standard definition of closed mortgage alluded to above is not the most common form of mortgage offered in the market, it is available through a number of lenders.
For mortgage lenders that do offer a truly closed mortgage with respect to prepayment, there are some potential benefits to the borrower.
As an example, in these situations where the lender is nearly certain to be receiving payments on closed mortgages funded, the mortgage lender may offer a very attractive interest rate.
So from the borrower’s point of view, if the borrower thinks he or she has little to any need to prepay the mortgage during a proposed interest term, the trade off of not having any prepayment options may be more than offset by a lower interest rate.
Once again, because there is to standard terminology in the industry with respect to how the phrase or closed mortgage is used from a marketing and product identification point of view, its going to be important to thoroughly understand any lender’s prepayment options prior to committing to a mortgage product.
Milton Private Second Mortgage
“Milton Private Second Mortgage Financing Can Be Arranged Quickly On Qualifying Properties”
Milton private second mortgage financing is available through our private money lending sources on a wide range of commercial and residential properties.
The key for getting a private 2nd mortgage approved and funded is going to be solid equity in the real estate property offered as security.
Our private lenders are interested in solid real estate mortgage investment opportunities and typically provide one year terms for Milton private second mortgages.
In order to apply for a private second in Milton, you will need to complete a basic application form and list out your personal net worth and outstanding debt obligations.
And even though your personal credit may not factor into the lending decision, a private lender may still want to review your credit profile to get a better sense of who he or she may be dealing with.
A real estate appraisal recently completed is also going to be required.
For commercial properties, some of our private lenders will consider relying on an existing commercial appraisal that is one or two years old, if they believe it is still representative of the market. This not only is a cost saving to the applicant as commercial appraisals can be quite expensive, but also a time saving in that commercial appraisals can take more than a month to complete.
For residential properties, and a current appraisal is going to be required and typically can be completed in a just a few days.
For fast closing requests, a Milton private second mortgage can be put into place in two to five business days providing everything is in order and you have a lawyer at your disposal who can enroll in the process on short notice.
Most Milton private second mortgages take ten to fifteen days to get in place from the time of application to the day of mortgage funding.
Funds are available for a wide variety of uses including debt consolidation, mortgage refinancing, and construction financing.
The loan to value ratio typically provided is in the 75% to 85% range.
If you require a Milton private second mortgage, I suggest that you give me a call so I can quickly assess your situation and provide private 2nd mortgage financing options for your immediate consideration.
Strip Mall Financing
“Strip Mall Mortgage Loan Financing Is More Specialized Lending”
It’s not a given that every commercial lender is going to provide strip mall financing.
Even for commercial lenders that do fund strip mall mortgages, they are likely going to be ruled somewhat by the percentage of their portfolio that can be committed to this type of commercial mortgage.
What can then end up happening with these strip mall funding sources is that they are in and out of the market depending on their portfolio mix at any given point in time.
From a leverage point of view, strip malls are typically financed between 50% and 75% of the appraised value of the strip mall, which the lender may want to consider on both a market and income approach to value. The wide range for loan to value ratio is due to the large variability that exists among strip malls including age, condition, location, layout, and so on.
From a cash flow qualifying point of view, most banks and institutional lenders will be looking at a debt coverage ratio of 1.20 to 1.30 (debt servicing requirements divided by cash flow). Debt service will be greatly influenced by interest rate and amortization, both of which are going to vary by the lending funding group looking at the deal.
In the market, the lowest cost form of strip mall mortgage loan financing is going to come from banks and institutional lenders. The next best option from a rate perspective will come from private bankers, investment groups, and other quasi institutional lenders that occupy the sub prime lending space. While the interest rates may be slightly higher, these groups can be slightly easier to qualify with and tend to focus on the applicants that are either just out of the reach of bank financing, or don’t have the time to go through the typically long debt funding process that you will find with most bank and institutional lenders.
As a short term form of strip mall mortgage financing, private mortgage lenders can also be a good source of funds in terms of both speed in getting a strip mall mortgage in place and the flexibility to get out of the private mortgage when other funds are available or lower cost financing can be arranged.
Each strip mall and borrower profile is a unique situation that will have a specific fit in the market place.
To determine where to apply for strip mall financing at any given point in time, applicants should consider the services of a commercial mortgage broker that has access to all the different categories of strip mall lenders in the market place.
If you have a strip mall financing requirement, I suggest that you give me a call so we can go over your situation and discuss potential strip mall loan financing solutions that may be available to you.
Multi Unit Condominium Construction Financing
“Multi Unit Condominium Construction Financing For Condo Build And Inventory”
Multi unit condominium construction financing is a available from our institutional, sub prime, and private mortgage lending sources.
For condo build financing, the keys to getting funds in place are going to include but not be limited to: 1) the market feasibility of the project in terms of short term resale potential, 2) the amount of equity investment the owners of the project are investing in the deal, 3) the track record of the owners, builders, and/or developers completing similar projects on time and on budget; the budget of the project and the validation of its accuracy from third parties; and the number of condo units that have been presold prior to construction starting.
With all potential condo construction financing requests, there are potentially three different types of financing options that are going to be available to them, ranging from bank or main line institutional lender, the sub prime quasi institutional lender, and the private money lender.
The goal for any project is to match the borrowers up with a lending source that is the most relevant for the projects profile and can provide the capital required for the cost and terms that a borrower is prepared to accept.
For projects that are completed and have received condo status, we can also arrange condo inventory loans for our customers as required.
A condo inventory loan is typically required at times for a couple of different reasons.
The most common reason is that at the end of the project, there are still operating costs to get covered off on a monthly basis before sales from condo units are received, requiring an incremental source of money to aid the cash flow. With a condo inventory loan, the incremental fair market value of the project is being levered to provide the additional capital needed to make the cash flow work in the short term.
Another reason for a condo inventory loan is refinance more expensive construction financing once the risk of construction has been removed.
The last most common reason for a condo construction inventory loan is when the builder or developer requires an equity take out for a new project they are trying to get going and need an inventory or bridge loan to draw on the equity before the proceeds from condo sales are received.
Regardless of the condo building construction requirements or the condo inventory requirements, are goal to match up our clients with the most relevant sources of multi unit condominium construction financing as quickly as possible.
If you are looking for multi unit condominium construction financing for a project you are planning or are in the middle of, I suggest that you give me a call so we can quickly go over your requirements and provide different financing options for your consideration.
Multi Unit Construction Financing
“Multi Unit Construction Financing Loans Continue To Be A Very Popular
Lending Product”
Multi Unit Construction Financing Loans And Mortgages are a very popular item with lenders in areas where the supply and demand numbers make sense.
Of all the different commercial mortgage financing programs out there, multi unit construction financing is arguably right at the top of the heap in terms of lender construction financing interest.
The category of multi unit construction includes condominium projects for both residential and commercial use, retirement homes and long term care facilities, student housing, apartment buildings, and so on.
All of these forms of investment property provide the basis for being able to cash flow and debt service the financing required by either the buyer or the developer to pay out the construction loan at the end of the project.
The keys to strong competitive interest in a project is going to include the market suitability, the owners investment or planned investment or equity position in the build, and the exit strategy to either resell units upon completion, or rent out occupancy to generate cash flow for a long term take out mortgage.
Because of the high lender interest in multi unit construction financing requests, there are different slices of the lender market available to builders, property owners, and developers.
The best rates are likely going to be coming from the major banks and institutional lenders who occupy the lowest risk lending space in the market. But with cheaper rates also comes more stringent requirements for financing that may or may not fit your project.
If you have a project that does not qualify for major bank multi unit construction financing, there may be several other options to consider.
The next level of options could be called sub prime or quasi institutional where the rates may be slightly higher than what you could get from a primary or secondary bank, but the financing requirements may also be not quite as strict as what you will typically find with the lower cost sources of construction financing.
Especially in large geographic centers, these second tier lenders can be both Canadian and U.S. based, as there is a lot of investor interest to get funds into the Canadian market space due to the economic stability in Canada as compared to other areas of the world, including the United States.
Beyond this secondary lender group, there are also private mortgage lenders that will fund multi unit construction loans.
The majority of private mortgage lenders that will finance multi unit construction will focus on projects under $5,000,000. That being said, there are mortgage investment corporations and syndicated lending groups that will consider large multi unit construction loan requirements as well.
Because of the number of potential funding sources out there, each with their own unique program requirements, its going to be important to make sure that you’re project is well aligned with a source of multi unit construction financing that best meets your requirements.
In order to accomplish this, your best approach is to work with a commercial mortgage broker who can introduce you to multi unit construction financing sources that are highly relevant to your construction financing needs. An experienced mortgage broker can potentially save you considerable time and money compared to what you might end being able to arrange on your own.
Burlington Private Second Mortgage
“Burlington Private Second Mortgages Available On A Wide Range Of Property Types”
We provide Burlington private second mortgages through our private lending partners.
Collectively, out private money lending sources can provide Burlington private second mortgages on a wide variety of residential, commercial, and industrial property.
Because each private lender has his or her own lending and funding criteria, its important to be working with a large enough pool of lenders to meet the majority of financing requirements of our clients.
With Burlington being a strong real estate market, anchored within the borders of the Greater Toronto Area, most of our GTA based lenders will consider deals from Burlington, increase the available supply we have for Burlington private second mortgage requests.
In other areas more removed from the GTA, private lenders can be very localized making it hard at times to locate 2nd mortgage financing on different property types.
But the Burlington are provides us with a number of choices to draw from, greatly increasing the chances of a funding being available for a private second.
Regardless of the capital requirement of the borrower or applicant, there is typically a need to get the deal completed in as short a time period as possible.
Our average turn around time on Burlington private second mortgages is ten business days.
That being said, it is possible to get a private 2nd mortgage in place in between two and five business days, provided that the applicant has everything in order and is working with a lawyer who can provide on demand attention to the mortgage process.
Most of our private mortgage lenders will consider loan to value ratios up to eighty percent. There may be options for higher leverage, but that will be very much deal and lender specific.
The rates for a private second will also depend on the real estate offered for security and the lender as well as the ending loan to value for all mortgage registrations against the property.
But for a general rule of thumb or guideline, a private second mortgage interest rate is going to be, on average, at least two percentage points higher than a private first mortgage on the same property.
Our goal as mortgage brokers is to locate a source of financing as quickly as possible that meets your borrowing requirements and then to work closely with yourself and the lender to get the deal closed and funded.
If you are in need of a Burlington private second mortgage, I suggest that you give me a call right away so I can quickly review your requirements and provide private second mortgage financing options for your immediate consideration.
Commercial Mortgage Rates
“Commercial Mortgage Rates Can Come In A Wide Range”
Commercial mortgage rates can be more than a bit difficult to understand at times.
If you qualify for the posted institutional “A” lending rates, you’ll find that even though commercial mortgage rates have gone up slightly in the last year, they are still set at record lows across rate terms.
For the businesses and individuals that qualify for the top end rates, the cost of capital is very good these days with terms of 5 years coming in under 4.5% from some lenders.
But once again, this is for those that qualify for cheaper money, which is far from an automatic occurrence.
Strong cash flow from strong real estate in strong markets equals lower cost of capital.
For anything outside of that description, the cost of capital is going to be higher.
While that’s hardly the end of the world, there can be a considerable range in interest rates for properties that do not automatically fall into the premium “A” credit range.
Obviously the more competition there is for any type of commercial mortgage application, the better the available rates will be in any market category.
And higher end competition will advertise their rates and work to gain the business.
Where commercial mortgage rates really start to vary across a range is when there is less competition for the business, where commercial mortgage lenders are interested in the opportunity, but are selective in terms of the amount of funding they place in any particular segment and at the rate they can place the funds.
Commercial mortgage financing can be very much a game of timing when you can’t fall into the deep pockets of the large banks or institutional lenders.
If you have good cash flow and a solid property, there is likely a decent commercial mortgage rate out there, but the challenge is finding and getting in place in the time you have to work with.
The commercial mortgage market, especially in larger centers where there are more commercial property assets, will have a constantly changing market dynamic where mortgage lenders will come in and out of the market, and where long time commercial mortgage lenders will pull in and out of certain markets according to the weighting of their portfolio.
Sources of money for commercial lenders can also dictate the costs of money for certain types of properties at different period of time along with money supply. In the end, lower rates don’t do you any good if the lender doesn’t have the funds available, or isn’t prepared to commit funds towards a commercial mortgage for your property or project.
Primarily because of time pressures, many business owners and property owners can end up securing a financing rate that is higher than what is available to them. When time is limited, its going to be important to understand where the market is at and which lenders are going to be the most interested and most aggressive towards any particular opportunity.
Focusing in on the wrong lender may get you funded, but perhaps at the higher end of the commercial mortgage rate range for your property.
The best way to increase your probability of getting a good commercial mortgage rate out of the market at any given point in time is to work with a commercial mortgage broker who can get you working with a commercial mortgage lender capable of meeting your requirements and providing a very competitive offer.
If you’re finding it difficult to qualify for the posted “A” commercial mortgage rates and want to better understand the next available options, I suggest that you give me a call so we can go over your situation together and review different commercial mortgage rate options available in the market.
Oakville Private Second Mortgage
“Oakville Private Second Mortgage Financing Options From Private Mortgage Lenders”
We provide Oakville private second mortgages to our customers requiring subordinate mortgage financing against their residential, commercial, or industrial property.
An Oakville private second mortgage can be arranged for a number of different requirements including debt consolidation, construction or renovation, second mortgage refinancing, and non specific capital requirements.
The private lenders that provide these types of mortgages are interested in the amount of equity in the property, the property’s condition, and the strength of the resale market for similar pieces of real estate in the same area.
While an Oakville private second mortgage may be required due to distress credit on the part of the borrower, it may also be put into place due to the speed in which it can be put into place compared to a conventional mortgage from a bank or institutional lender.
In many cases, from the time of application to funding, we can get an Oakville private second mortgage in place in five business days or less with the overall average to complete the process coming in at ten business days.
We also arrange a considerable amount of construction financing where the construction mortgage is arranged in second position against the property where construction is taking place.
Using private mortgage financing for construction has gained in popularity due to the speed in which the financing can be put into place and the more predictability for the most part with the draw management process followed by the private lender.
Construction financing can be arranged for the primary construction mortgage, even if its registered in second position, which is one of the benefits of an Oakville private second mortgage in that most banks and institutional lenders will require a first mortgage position for a construction loan. This can be very inconvenient if you have a good first mortgage in place with a solid rate, especially if you’re doing a home renovation loan or addition where the construction loan amount is relatively small.
We also provide construction financing in the form of a construction bridge loan where at the end of the project a small amount of funds is still required to complete the work outstanding, but cannot be drawn from the existing construction loan which is at its approved limit.
Regardless of the requirement, an Oakville private second mortgage is something that can be put into place quickly, allowing you to draw against your existing equity in your property.
Prepayment Penalty Calculations
“Prepayment Penalty Calculations Continue To Be Foggy For Most Borrowers”
Mortgage prepayment penalty clauses and calculations are some of the most difficult things anyone can try to understand in the world of consumer finance and perhaps beyond.
The major banks in particular are famous for providing very cryptic language that can be difficult to understand and even harder to apply to your mortgage if and when you get into a situation where you are looking at prepaying the mortgage outside of the allowable provisions that don’t invoke a penalty for doing so.
Consumer frustration has built to the point that class action lawsuits have been filed against mortgage lenders with the plaintiff’s claiming that the prepayment penalties calculated and charged were not appropriate or enforceable.
The purpose of a prepayment penalty is allow a mortgage lender to not be placed in a loss position on a mortgage when interest rates are falling.
Mortgage lenders provide funding on a margin between their own cost of funds and the mortgage rate provided. If a borrower prepays the mortgage during a time when interest rates are lower than when the mortgage term was issued, then the borrower will not be able to replace those funds in a lower interest rate market without incurring a loss or at the very least a lower profit margin.
So while the applicability of a prepayment penalty makes business sense, mortgage lenders have not gone out of their way for the most part to make the wording and the calculation of the penalty easy to understand for the borrower. And in the case of some of the class action lawsuits, the claims speak to vague or unenforceable wording being used.
Whether these lawsuits hold any water or not is yet to be seen. But the reality here is that the mortgage industry as a whole as a ways to go to make the understanding and application of the prepayment penalty more customer friendly.
And we are starting to see this with certain lenders. We can only hope that the trend to greater transparency and clarity with this issue will continue.
In the mean time, if you are entering into a mortgage that has a prepayment penalty clause, make sure that you take the time to understand it so that if and when it becomes applicable to you there aren’t going to be any surprises.
One of the ways to gain greater insight into prepayment penalty clauses provided by various mortgage lenders is to work with an experienced mortgage broker who can guide you through the nuances from one mortgage lender to another and put you in a position to make a more informed decision when it comes to selecting a mortgage option.
The Commercial Mortgage Financing Story
“Every Commercial Mortgage Financing Application Has A Story The Needs To Be Told In Order To Get Approved For Funding”
Commercial mortgage financing is like any other type of business financing in that there needs to be a beginning, a middle, and an end that makes sense.
Sometimes the story is fairly easy to tell and sometimes it can take quite a bit of explaining and supporting documentation to get a lender comfortable with the situation.
Because basically all commercial mortgages are customized financing facilities to some degree due to the fact that every property and every supporting cash flow stream is different, its always going to be important for a lender to be able to wrap their head around why financing is required and why it would be in their interest to provide it.
Especially when you talking about a bank or institutionally provided commercial mortgage, the specifics of the story are going to be important and need to hold water during the entire loan application and review process.
Private lenders that provide commercial property financing are also interested in the basic story to make sure that they are not getting into situation that they may regret later.
Instead of just referring to the beginning, middle, and end of a story, lets get a bit more specific.
A commercial mortgage lender is going to want to know the current status of the property which is explained through appraisals, environmental reports, pictures, and so on. They are also going to want to know about the repayment source of the mortgage which is going to be supported by rental agreements, historical financial operating statements, contracts, etc. Lets call this the beginning.
Or another way of putting this is the current status of applicant and property.
The second phase, or middle of the story is a summary of the both the property’s and borrower’s backgrounds … how did you get to this point in time and how did the present commercial financing need come about.
The third phase, or end of the story is focused on how a mortgage will be repaid over time and the exit strategy for the lender. The end of the story, or where are we going from here phase will need to relate to how the property and mortgage fits into the bigger scheme of things.
For instance if a business is acquiring a commercial property for one or more of its operating entities, all these different divisions of a business can have dynamics that will impact a commercial mortgage either directly or indirectly.
Yes, there are commercial mortgage requests that are very straight forward…but most are not, and its the ability to tell a complete and comprehensive story that can make all the difference between getting financing and not getting financing.
There are business owners and managers that believe they don’t need to tell a comprehensive story and try to control the information that is disclosed to a lender. While this approach can work, it can also backfire as well as any confusion or uncertainty with the information provided will most likely lead to a decline of the application.
This is also where a good mortgage broker can be invaluable to you in putting an application for a commercial mortgage together where the story is told clearly and in an order or sequence that will be well received by a commercial mortgage lender.
If you have a commercial mortgage financing requirement, I suggest that you give me a call so we can over over the details of your capital needs together.
Mississauga Private Second Mortgage
“We Place Mississauga Private Second Mortgage Loans From Our Private Lending Sources”
A Mississauga private second mortgage can many times be your best option for raising additional capital quickly.
A second mortgage automatically means that there is a first mortgage already in place, and in many cases it doesn’t make sense to refinance the first mortgage for some combination of lower interest rate, longer interest term, change in amortization, or access to additional capital.
Especially if there is a fixed rate involved with the first mortgage, any refinancing or early prepayment of the mortgage can result in a significant prepayment penalty that the borrower may want to avoid.
Or, if you have stressed credit, you may not be able to qualify for a new first at the current top end market rates, so you’re better off keeping it up to date and leaving it in place.
Just like any type of private money financing, a Mississauga private second mortgage is short term financing option that typically provides an interest term of one year.
And because private second mortgages typically can be put into place quickly, they can make excellent short term funding options.
The use of funds can really be anything, but the most common applications of incremental capital generated from a Mississauga private second mortgage include 1) debt consolidation; 2) construction or renovation financing; 3) bridge financing of a personal or business transaction.
A Mississauga private second mortgage is effectively an equity mortgage where the private lender is making a lending decision based on the market value of the property and the amount of equity the borrower will still have invested once the private second mortgage is put into place.
While most private lenders are still going to be interested in how the applicant is going to make monthly interest payments and what the state of their credit is like, the primary criteria for a lending/funding decision is going to be based on the quality of their security position.
So if you have a good piece of real estate property that is well maintained and in a good market area in Mississauga, then there is a very good chance that you can secure a Mississauga private second mortgage with solid rates and terms.
Because most private mortgage lenders do not transact directly to the market, its going to be important that you’re working with an experienced private mortgage broker that direct access to private mortgage lenders that fund second mortgages in your area.
If you’re in need of a Mississauga private second mortgage, I suggest that you give me a call so I can quickly assess your situation and provide private second mortgage options for your immediate consideration.
Condo Development Inventory Loan
“Condo Development Inventory Loans Are Readily Available For Finished Projects”
Condo development inventory loans are essentially short term financing that is arranged against the fair market value of finished condo units that are either unsold or sold and waiting to close.
There are three basic reasons why a developer would want to secure a condo inventory loan.
The first reason has to do with cash flow. There are times at the end of a condo development when the project is out of cash and is basically waiting for proceeds to come in from condo sales. A condo inventory loan would be used in this case to provide incremental capital to the project to cover the monthly operating costs which would include the debt servicing on the primary construction loan.
A second reason for a condo development inventory loan would be to pay out the construction mortgage in place. Condo inventory loans are priced off of completed inventory that can be sold on the open market, so the risk associated with this type of construction mortgage financing is considerably less than the risk associated with actual construction. As a result, the cost of funds for a condo inventory loan can be significantly less than the construction loan outstanding and there may be a considerable cost saving to refinance the construction loan with a condo inventory loan, even if its only going to be outstanding for a number of months.
A third reason for a condo inventory loan is to draw equity out of the existing project, based on the increase in value from the completion of construction, and invest it into a new project that the developer wants to get going or is in the middle of.
In any of these cases, the process for getting a condo development inventory loan is fairly straight forward as we are talking about new condo units or inventory items where the value is going to be easy to determine through a third party appraisal. Depending on if the condo inventory has been presold or not, condo inventory lenders will look at financing between 65% and 75% of the value of the inventory.
The more presales that exist, the higher the loan to value will be.
Once again, because we are talking about financing finished condo units that in many cases are already sold and waiting for closing, the process for assessing an application for condo inventory financing can be completed rather quickly with funds being available shortly there after.
If you are in need of a condo development inventory loan or would like to know more about them, I suggest that you give me a call so we can discuss your requirements together and go over potential financing solutions that meet your needs.
Click Here To Speak Directly With Toronto Mortgage Broker Joe Walsh
Commercial Mortgage Placement Costs
“The Time It Takes To Get A Commercial Mortgage In Place Is Largely Impacted By A Lender’s Third Party Verification Requirements”
Commercial mortgage placement costs are getting quite significant and if you want to not only increase the probability of getting the financing you want, in the time period you want it in, then you may need to consider spending even more money.
The standard underwriting requirements of all bank and institutional lenders now require commercial appraisals and environmental reports on just about any commercial mortgage financing they provide.
And if the loan is large enough, the cash flow verification requirements can demand review engagement or even audited financial statements no less than 6 months old.
While this is certainly not anything new to business owners that require financing on their commercial property, what many are still struggling with is getting in front of the right lender and getting financing in place in a reasonable amount of time.
The reason both of these are difficult is that most borrowers still want to apply for financing, projecting ahead what the appraisal and environmental report will say. They want to apply and get approved for financing, subject to the proper completion of all the third party verifications that the lender is going to be asking for.
There are a number of challenges with this approach.
The first is all about timing. In certain areas, at certain times of the year, it can be next to impossible to get a commercial property appraisal completed for several months due to the back log of the appraisers that work in the area.
This is not a big surprise in that all commercial property basically requires up to date or recent commercial appraisals, so at times its going to be hard to get one done quickly.
The second challenge is not knowing exactly what some of these third party experts are going to come up with in terms of valuation, potential liability assessments, business issues, and so on.
If there are any material surprises, its likely a lender will pass on the deal and your left to start over again with someone else.
To combat these issues, one can make the argument that it makes sense to get these third party reports completed on a regular basis or ahead of time on your own.
Yes, there is a risk that a funding source may require you to redo something using one of their approved service providers, but at least you can accurately present the information to make the case for financing in the first place without too much risk of being surprised further down the process from a third party report.
And, in many cases, assuming you are getting appraisals, environmental reports, and financial statements done by name brand providers with solid commercial reputations, there is always a good chance that their work will be accepted by a wide variety of lenders.
But even if you risk having to do things twice, you may still be much farther ahead than those that start out with nothing when they apply, or information reports that are badly dated and perhaps no longer closely represent the property in question to the lender.
Spending some money up front and being proactive assembling what a commercial property financing source is going to require any way can make all the difference in getting the deal you want done, and getting done in the time you have to work with.