2015 - A tough year for investors in Canada in terms of Financing?

Question

Hi all, I am finding very hard to get proper financing for residential deals with A lenders, 20% down and rates lower than 4%.

it seems that since mid 2014 it is impossible to get lending from A lenders (big 5 banks) at preferred rates (+-3%) for investors that have more than 1.5 million in mortgages, even if the number of mortgages is only 2.

This is what I found:

RBC: they have a limit of 1.2 million for residential mortgages and low rates (<3%)

BMO: they require 30% down instead of 20% for non owner occupied properties

CIBC: unlimited mortgages with 20% down, but properties need to cash flow, which in Toronto is impossible upon purchase.

Other banks don't even respond since I have I high dollar amount in mortgages

The Best solution I found until now was going with a B lender that will charge 4% to 5% in interest with 20% down. This becomes quite costly, making commercial lending almost more viable at 3.5% rates with 30 to 35% down, meaning, moving from residential purchases to building purchases.

Anyone with the same issue?

Filipe Matos · Answer

Yeah, I think commercial mortgages are not included on the approval of residential properties.

I have had a good track record with banks, but it seems that does not matter to them anymore.

tks

Roy N. · Answer

The two commercials (3.0 / 2.6) I referenced above are 1.5+-million each ... but that's commercial.

The renew/refinance we are doing is on a residential MFH - we are pulling out some capital, so the final number will be 240 - 250K.

Your relationship with the lendor, track record and debt ratios will play a factor into the amounts and rates you can secure.

Filipe Matos · Answer

Hi Roy, I wonder if my situation is a bit different since my total mortgage amount is higher than 1.5million and the mortgages I require are higher than 400K?

I got approved months ago for 3% on a 200K mortgage, but maybe they make it difficult for higher amounts?

Filipe Matos · Answer

I am fine with 20% down, what I am not fine with is rates above 3%

Which lenders do portfolio lendig?

Roy N. · Answer

@Filipe Matos

We have not found anything worth buying recently, but are actively looking.   We are also renewing/refinancing a mortgage at the moment and secured a rate of 2.45%.

We have also pre-arranged financing for a couple of LOIs on mid-sized buildings and obtained 3.00 (uninsured) and 2.6 (insured).

@Elliott Davis

I do a bit of lending - small amounts - out of my SDRSP.  I have no 1st mortgages at the moment (the last one was at 6%), but have a couple of seconds at 10% (which is pretty low as I know the borrower quite well).

Ash Badry · Answer

Hi @Filipe Matos  and @Elliott Davis ,

My fiance and I buy houses in Edmonton with funding from a private mortgage company, renovate them, and then refinance them with a traditional bank. The whole process usually takes about 3 months. Since we refinance within the first year of the original purchase it's a bit more difficult for us to get the bank financing but we have been able to do the last couple through a mortgage specialist at TD. The biggest downside is that we have to put 25% down instead of 20%. The mortgage specialist works all across Canada, if you'd like her info just send me a private message.

Cheers,

Ash

Elliott Davis · Answer

Hi Filipe, I just recently butted up against this as well. I took my mortgage broker out for a coffee to discuss a strategy to get to 10 rental properties. My wife and I currently have 4 plus our primary place of residency and it was explained to me that a lot of lenders are not extending mortgages to those with with a certain number of mortgages or above a certain dollar amount. The specific number of properties and dollar amount varied slightly by lender.

His suggestion for us, to get to our goal of 10 buy-and-hold rental properties was to use portfolio lending. He had worked with 3 different lenders who would lend in this way. They still required 20% down but I don't recall him saying that their rates/terms where any different then a conventional financing structure.

Another thing that I am researching is private money but the rates will likely be higher than 4% so may not be the solution you where looking for.

I am in Edmonton so I'm not sure what differences will exist for you in the GTA but good luck and I hope this was helpful.

Elliott.

Chad U. · Answer

Hi Filipe,

I cannot attest to your difficulty in getting mortgages in Canada, as I have been a seller of Cdn real estate versus being a buyer for the past little while.  That being said, the last place I sold was for $700K and the buyers were able to obtain a 20% down mortgage with sub 3% rate, however I do not know what their existing debt load was like.  Another investing colleague of mine just purchased his 11th and 12th property with similar mortgage terms. We are all part of the same investing group in the western GTA.

The one thing I do know that they have in common is that they use the same mortgage broker, who has a great relationship with many, many lenders.  Have you considered reaching out to any brokers to solicit their feedback?  I can pass on his name if you are interested.