July 19, 2018 By Loan Central

What a Creative Mortgage Broker Does (and Doesn’t Do)

To this day it amazes me that some people think that a mortgage broker’s job is to help create fake documents. If you’re self employed and you don’t report enough income to qualify for the mortgage you want, you can just call a mortgage broker and s/he will create the documents you need, right? WRONG!

This is fraud and it’s illegal!

Unfortunately, if you can believe it, there are people out there – some call themselves mortgage brokers – who do exactly this! They give the industry a bad name and they create very serious problems for people!

Recently I was working with a self employed couple who were looking for a mortgage. They were also dealing with a fraudster who said they could get the applicants the mortgage they wanted from a bank, even though there was no way the couple would legitimately qualify for the mortgage at the bank.

At first the bank approved the application, but then later reneged once they noticed “inconsistencies” in the information provided to them. Not only did the bank cancel the offer at the last minute leaving the applicant/borrowers scrambling, but the bank also reported the incident to Citadel fraud reporting centre, a division of Equifax, leaving what could be a permanent stain on the applicant’s credit profile.

I arranged a good, alternative institutional mortgage for the couple, but when my lender got notice of the Equifax/Citadel warning, my lender cancelled too. The couple’s credit profile had been damaged and unless they could get the original bank to withdraw the report to Equifax, the borrower/applicants might never again be able to borrow money from the bank or qualify for an institutional loan.

Next I arranged private financing for the couple, albeit at a higher rate, to help them with their objective of closing the transaction on time. I never heard back from the couple again, so I don’t know what they ultimately did.

It’s never easy when you work hard for people and then they disappear on you, but it does happen occasionally. I guess you really have to wonder about the character of some people to begin with, who would willingly get into bed with a fraudster just to try and save a few dollars.

So then what DOES a creative mortgage broker do?

A creative mortgage broker seeks to;

i) thoroughly understand your present situation,

ii) find the right lender for your particular situation, and

iii) bring to light the strengths of your application.

Then, we sprinkle it with fairy dust and pray like hell.

For mortgage solutions, call me today, I look forward to hearing from you!

Sincerely,

David Grossman, MBA
RMAI/Loancentral.ca Canada/Real Mortgage Associates Lic #10464
david@loancentral.ca
Tel: 647.557.7389

https://loancentral.ca/mortgage_brokers/

May 22, 2018 By Loan Central

Rental Properties:

How Much Down Payment do you Need?

To answer this question, the first thing we need to know is whether the property residential or commercial.

Residential (1-4 units): You need to have a least 20% down to purchase a residential rental property. It’s possible to purchase an owner occupied, “second home” with as little as 5% down, as long as your initial intention is to live in the property (you or a family member). After the purchasing the property, if your circumstances change and you decide you want to rent out the property, that’s OK, as long as your original intention was to live in the property. In qualifying for financing on a “second home”, you need to be to have enough income to qualify for the mortgage on your own, without any rental income. If you do purchase a second home with the intention of living in it, and later decide to rent it out, obviously you should report any rental income as you are required to pay tax on it.

Commercial rental properties fall into multiple categories including multi residential (5 units or more), office, retail and industrial.

With Multi residential you usually need at least 25% down. Even though CMHC has a program where you can purchase with as little as 15% down, they will usually value your property at less than what you are paying for it, so you’ll still end up needing at least 25% down.

For other types of commercial properties, the down payment will usually range between 25-35%, depending on the rent and the quality of the tenants. The lenders will want to know that the rents will more than cover your mortgage payments plus operating expenses. Different lenders have different coverage requirements. Also, it will be viewed more favorably if you have stronger the tenants; for example, Shoppers Drug Mart is considered a more valuable tenant than Ma and Pa’s donuts.

For mortgage solutions, call me today. I look forward to hearing from you.

Sincerely,

David Grossman, MBA
RMAI/Loancentral.ca Canada/Real Mortgage Associates Lic #10464
david@loancentral.ca
Tel: 647.557.7389

https://loancentral.ca/rental-properties-financing/

April 20, 2018 By Loan Central

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!

Sincerely,

David Grossman, MBA
RMAI/Loancentral.ca Canada/Real Mortgage Associates Lic #10464
david@loancentral.ca
Tel: 647.557.7389

https://loancentral.ca/369-2/

April 20, 2018 By Loan Central

How to get Construction Financing

We handle 1st & 2nd Residential, Commercial, Land, Construction & Self Employed Mortgages. Credit Issues OK. Private Money.

If you need a construction mortgage, here are some of the things our lenders consider to be most important:

1) Do you have the needed approvals? Is your project pie in the sky, or is it real? You cannot build and we cannot get you construction financing if the land is not appropriately zoned and you don’t have the needed approvals from the city.

2) What is your experience, have you ever done this before? This is important. If you don’t have any experience, you should either have a strong partner and/or lots of equity behind you.

3) Your own cash in. It’s possible to get financing for up to 80% of the construction costs (hard and soft costs), you need to be able to finance the balance from your own resources.

4) What are hard and soft costs? Hard costs are construction costs. Soft costs are for permits, legal fees, applications to the city, architectural drawings. Financiers will want to see your detailed budget.

5) Location of the property – this is always important, but it’s especially important where construction financing is concerned. If the lender had to take back the property due to non payment, they need to know they can liquidate/sell it quickly. This is especially important in construction financing because there is a smaller pool of potential buyers for a project that is only partially complete.

Whatever your mortgage needs, call me today.

I look forward to hearing from you!

David Grossman, MBA
RMAI/Loancentral.ca Canada/Real Mortgage Associates Lic #10464
david@loancentral.ca
Tel: 647.557.7389

https://loancentral.ca/358-2/