Dealing with Hard to Place Refinances, Including “Bundle” 1st & 2nd Mortgages
By David Grossman, MBA
A recent CIBC Capital Markets report has been circulating, saying the number of mortgages that will need to be refinanced this year is up substantially from the 25 to 35 per cent range in a typical year, to a whopping 47% this year. They say that in recent years borrowers have taken on mortgages with two- or three-year durations, which are now up for renewal alongside the typical five-year mortgages.
In none of the articles I read was any mention been given to issue of “Bundle Mortgages” maturing this year. A Bundle Mortgage is where an Alternative lender/B Lender, like Hometrust, for example, advances a first mortgage to 80% of the property value, and then a private lender (often a Mortgage Investment Corporation (MIC)), lends an additional 5 or 10% of the purchase price to get the borrower to 85 or 90% total financing.
Bundle Mortgages were frowned upon by the Office of the Superintendent of Financial Institutions (OSFI) but still they were commonplace in the broker community through 2017. As of Jan 2018, Bundle Mortgages are no longer allowed.
Given that real estate prices are now down, and probably all Bundle Mortgages that were arranged in 2017 are maturing this year (private lenders typically lend 1 year at a time), it may not be possible for many of people who have a bundle mortgages to renew, and as such, some property owners will be faced with a serious problem.
They may find themselves either needing to sell the property, or borrow money from friends and family. If they have other property we can try and take equity out of another property to pay down the second mortgage on the first property. One other option would be to try and work something out with the existing second mortgagee, whereby the property owner starts making bigger monthly payments to begin paying down the mortgage principle more aggressively. If there is very little equity in the property, the second mortgagee might be willing to consider such an arrangement and agree to a mortgage renewal, since forcing the sale may not leave the second mortgagee with enough money to get paid out entirely anyways.
Whatever your mortgage need, call me today for solutions.
I specialize in alternative lending. If you aren’t getting the mortgage service you need from the bank for any reason, I look forward to hearing from you!
David Grossman, MBA
RMAI/Loancentral.ca Canada/Real Mortgage Associates Lic #10464