When you’re trying to acquire a residential or investment property that’s close to, or greater than $1,000,000, it can become difficult to secure a conventional real estate mortgage for the type of loan to value you may be looking for.
Most of the major banks will apply what they refer to as a sliding scale where they will lend up to, say, 80% of the first $750,000 of value for a single family dwelling and 50% of the remaining value in a “major urban center”.
If the location is more removed from a major center by whatever definition is provided, then the ratios can drop to 80% of $500,000 and 50% of the remaining property value.
Rural areas will see the sliding scale go still lower, requiring substantial down payments to cover the difference between approved mortgage and lending value.
There can also be different sliding scales for rental properties and recreational or vacation properties.
Each lender will have their own policies and procedures for assessing different scenarios and will have their own sliding scales to apply.
And hardest aspect of these conventional mortgage sliding scales is that they will be applied regardless of your personal net worth or level of earnings.
As an example, if you’re earning $800,000 a year and have a $5,000,000 personal net worth or higher, that new cottage property you’re looking at buying for $1,500,000 in a remote area may only attract a mortgage of $900,000, depending on the lending rules of your bank for this type of property in this type of location for this purchase price.
The good news is that there are ways to get higher ratio mortgages and get around these sliding scales. The best way to determine what other options may be available to you is to give me a call so that I can quickly go over your situation, outline relevant options, and help you decide on a course of action.
I'm a Toronto Mortgage Broker that arranges mortgage solutions on residential and commercial real estate property. With over 30 years of mortgage financing experience, I'm able to quickly assess your financing requirements and provide relevant solutions for your immediate consideration. Joe Walsh Google+ YouTube Channel