Ask the Expert

Dear Isobel:
Banks do offer this type of financing but a lot depends on the type of land lease agreement in place and your personal ability to qualify. I would be happy to review if you complete the attached application or complete the full on-line application from our mortgage page at: casbmanagementgroup.com.

Dear BM:
If you are interested in purchasing income producing properties within a corporation you have a couple of options to consider;
If the properties are 4 units or less you may have the option of purchasing them as “residential properties” and you would apply jointly for the mortgage by qualifying personally under the current mortgage rules for this type of property and lenders will factor in your income, credit history and cash flow from the property. Some lenders will allow you to hold these properties within a corporation. At some point however you may wish to use the strength of the income from the corporation and fund new property purchases with a commercial mortgage. The advantage to funding personally are the lower down payment and better rates.
If the properties are 5 units or greater you are generally looking at a commercial mortgage with you acting as the guarantor. In this case you will not be qualifying personally. The cash flow and quality of the property become the key considerations for the lender as does your industry experience and net worth. Unless the property is exceptional in terms of the size and quality of deal, you can expect to pay a higher rate. As the down payment requirements are typically higher you may need to take advantage of vendor take back (VTB) financing options.
Investors are typically brought in to provide the down payment or to assist in qualifying for a mortgage. They may or may not become part of the formal mortgage application. You will need to be very clear on what the role of the investor is to play and what their return will be. There are really no rules in this area so you can negotiate an arrangement that is fair to all parties.
Happy to answer any additional questions or clarify as required.

Dear Cathy:
We would be happy to review your thoughts on how we could best contribute to the issue.

Dear Carrie:
Yes we will look at qualifying clients under a rent to own program. It works best where the clients have a down payment but not the current credit score to qualify for traditional lender financing. The clients would need to have the ability to repair their credit so that they can be positioned to purchase the home they want at some point in the future. Homes that can be purchased below market value are also attractive.

Dear Neale:
Your credit score would prohibit your ability to qualify for a “cash back” mortgage to 100%. You also have the issue of how you plan on paying for the renovations. My advice is to find a “mortgage partner” for the project. Use their credit strength and down payment money to qualify for a mortgage and then split the profits from the sale of the home.

We encourage clients to obtain three active credit lines such as credit cards, lines of credit, car loans etc., post bankruptcy as the quickest way to re-establish credit. It may take up to two years to repair. Alternatively a big down payment makes up for credit issues. If you had 20% down you should have no problem obtaining private financing. Rent to own solutions are an immediate option if you have good employment and a reasonable down payment.

Yes if secured with real estate. For unsecured, Citi Financial and Wells Fargo are your best bet for unsecured debt consolidation loans.

Dear Steve
The key is how well you have re-established credit after bankruptcy. If the van loan shows on your credit report that would be a bonus. The best thing is to complete an application so you know where you stand. We can meet at your convenience or I can send you an application to complete. Let me know what works best for you.

You have three options based on what you have told me.

Option 1. I would approach the owners of your home and see if they would be interested in a rent to own deal. Essentially they agree to sell it to you today but you would not close on it until such time as you would qualify for a mortgage. You make additional monthly payments to them so you have your down payment accumulated when you are ready to close.

Option 2. If they are not interested you find an investor to buy the home and they in turn sell it to you in the same arrangement as option 1.

Option 3. You begin to repair your credit immediately and if you do so you should be able to purchase in about two years if you have no further credit blemishes. This needs to occur regardless in order to fulfill the first two options. You will also need to save your minimum 5% down payment over this time.

Dear Peter:
I would look first at banks or other institutional lenders we have at our disposal just for the rate advantage alone. The fact you have many mortgages should not be a deterrent on its own. If you were looking to CHMC insure then 15% down is best case scenario. Likewise with private lenders I would target 15% down but the quality of the property is key. We also have the option of incorporating vender take back financing. Hard to quote rates without a full review of your situation but we would be happy to review.

Dear Sarah:
To buy a duplex rental property you will require 20% down unless it is owner occupied in which case 5% down. You can withdrawal funds from a business to be used as a down payment if you are able to access funds. You could show it as a second mortgage but there are simpler ways to record it from an accounting perspective. If you qualify to carry both your home and the rental property we could look at options for the down payment.

Dear Mike:
Our web site www.casbmanagementgroup.com has some mortgage calculators that will give you an idea of your ability to qualify. If you click on the mortgage link you will see a mortgage calculator link once on my Centum web site. The first mortgage calculator will work best. You can add to your income 50% of any rental income you expect. If you are having any troubles give me a call and I will walk you through it over the phone. This will give you a ballpark idea of what you can do, given your credit is acceptable. The full mortgage application and credit check will confirm your findings.

Dear Andrea:
A Lenders preference is to see three active credit lines with at least a limit of $2500 for two years and no missed payments over that time. There are alternative lenders who have no interest in even looking at a credit report but your down payment would need to be higher and you would be subject to higher rates. Then there is the middle ground. You could also look at the option of a co-signer. If you want to provide more details on your situation i would be happy to review.

Dear Bill:
If you complete, sign and fax or email the attached application back to me I will be able to tell you what is possible on a refinance.

The strength of financing may come from your joint venture partner. Typically you need to bring “something to the table” in terms of assets or experience. If you have the income to qualify for a property perhaps your partner brings the down payment and credit history?

Dear Neil:
Let’s have you complete an application and then we will be able to review your options. Happy to answer any questions.

Dear JP:
I am based in London, Ontario. We have offices across Ontario and service clients throughout North America. We would happy to review your specific situation and determine all your debt consolidation options. Our first choice is typically an institutional lender due to superior rates.

Dear Jami:
You can be the owner of two owner occupied properties and qualify with 5% down on the second home but it needs to be a single family home. With your mother living there it would qualify as owner occupied so the issue is really that it is a duplex. If the property was originally a single family home, that is your best argument to your assertion that you are converting back to a single family home. Of course there could be no tenant at the time of possession. The key to this in my mind is the way in which the MLS on the property has been prepared. If it mentions that the property could be converted back to a single family home that would be good support for what you seek to accomplish. I would have that discussion with the realtor as sometimes they market a property in a way that closes doors when it comes to financing options.

Dutton would be outside our comfort zone as it relates to managing the trades people required for the repairs but we could send a realtor out to give us an opinion on value. If there is enough equity in the home we may still be able to do it.
It will be difficult to qualify for a new mortgage in London without 3 months of current employment but we would be happy to review your situation to see if we can help.

 

 

 

Dear Franz:
My guess is no but the key is how you credit looks post bankruptcy. Lenders like to see three active credit lines with no credit blemishes after the bankruptcy and a two year history although it may be possible after one year. I would suggest you look at a rent to own type arrangement given your down payment. We can assist with that if you wish.

Bridge Financing typically is a bridge between existing financing and future financing. Using a home as an example. Let’s say you are selling a home with a closing of August 30th and are buying a home August 15th. You need the down payment from the sale of your home but of course don’t have it because your house sells 15 days later. Lenders will typically lend you the down payment for the 15 days or “bridge” from one financing to another. There are variations on this and some business applications as well. Pricing depends on how many days between the two deals and the type of deal as well. Let me know if you have any questions or want to review a specific deal.

What lenders look at is how well you have managed your credit after bankruptcy. They generally like to see two years of re-established credit with no blemishes. We recommend 3 active credit lines. If you have accomplished this, 5% down is possible as a down payment. If not then a bigger down payment will be required and this will vary with each deal up to a maximum of 35% down.

Dear Greg:
Great question but one best answered by your lawyer. I suspect your investment properties may be treated differently then your matrimonial home. Let me know what you find out.

Dear Tim:
If your credit is bad I suspect you won’t be able to add a third mortgage to pay down some of the higher interest debt with the property under renovation. Depending on your current interest rates there might be something that can be done to improve your cash flow. We should do an application on you so we fully understand your situation and figure out what your best strategy is moving forward. I have attached a copy of our application for you to complete and forward or we can get together at your convenience. I would like to see the house so I have an understanding of the cost to complete the renovations. It might be wise to complete in order to free up so extra equity. If you have a copy of the appraisal you could forward that as well.

Dear Tim:
We do provide this type of financing and if I understand correctly you are seeking a Joint Venture Partnership were you provide the expertise and we provide the funding. Anyone interested in being your backer would look at your experience and personal net worth to see what you bring to the table. You will need to be very specific on your financial requirements and what is in the deal for the backer in terms of a return on their investment. Not as easy as they make it look on TV. I would like to discuss your strategy when you are ready to proceed.

Dear Mike:
This is the type of deal we love to do. In terms of information this is what we like to obtain:
1. Commercial application
2. Borrower profile( resume) on you plus personal net worth statement
3. 3 years of financial statements on the property you are purchasing
4. Copy of the current rent roll
5. Appraisal if one has been completed. If not then some pictures of the property
6. Any environmental information
7. Copy of the purchase & sale agreement
It might be preferable for us to meet to discuss at your convenience or you can forward the documents and I will prepare the lender package and determine the best funding strategy. Happy to answer any questions in the interim.

If you are in the middle of a consumer proposal then it is unlikely that any institutional lender will be interested. Private lenders may still be an option depending on your requirements. Send us more details and I will forward an opinion.

Dear Lisa:
Mortgage applications do drop your credit score but we only need to do it once and can send it to multiple lenders. Based on your notes I am guessing you would need a 15%-25% down payment. On a rent to own you would need less of a down payment 5%-7% perhaps less. The bigger issue is what you are doing to repair your credit as under a rent to own you need to take legal possession at some point and will need to qualify for a mortgage at that time. We can advise you on how to repair your credit when we review your credit report. Your income would appear sufficient.

Without a complete review of your file I would recommend you renew with your current lender and try to negotiate the best rate you can. If your credit has dropped below 600-620 as a result of the consumer proposal and you show other delinquencies in payments, then it will be tough to find a good rate. You would also need significant equity in the home to attract a new lender.

Dear Jason:
The no money down could be an issue as to receive 100% financing on a “cash back mortgage” your co-signer will need to be strong enough to cover 100% of your mortgage payments in the event you default and have very good credit. Essentially they need to be able to purchase the home without your assistance.

If you are at 85% you are already maxing out your equity. 90% with a third might be possible in the short term if you have a good shot at refinancing. The property would also have to hold some potential as prices are dropping. I have attached an application if you would like to provide more details.

Dear Howard:
My apologies in the delay of my response but I have been attempting to find any legal precedents in the favour of the mortgagors. In my experience I have seen clients forced to sell their homes where an orphaned mortgage was created and the clients could not arrange alternative financing. I would be interested in reviewing the information you would have on this subject. As a private lender my expectations would be that I would be paid out on the date the mortgage becomes due given basic contract law would apply. Of course it may behove me to extend an agreement as the alternative of creating an orphan mortgage may be a less attractive solution. I would be shocked if the courts were able to force me to extend beyond my wishes.

Dear Melanie:
I am totally against consumer proposals; worst then a bankruptcy from a lenders perspective as lender treat consumer proposals like a bankruptcy yet a proposal it is like the bankruptcy that never ends. Forward me your credit report I will advise on your best strategy for credit repair.

Dear Tiffany:
The first step is to complete a mortgage application so we know what mortgage amount you would qualify for. I have attached one you could complete, sign and fax back to me.

Dear Courtney:
Lenders will only lend on the lesser of the purchase price or appraised value and since you are in bankruptcy some of our creative down payment strategies won’t apply. The fact you are renting the house you want to buy might provide an option either by the current owner being your bank for a period of time or by an investor buying the home with an agreement to sell it to you at a set time and price. You would still need some down payment for option two to work?

Dear Lisa:
The down payment is really a function of credit. If you have good credit 5% down is typical, or with really good credit you could qualify with no down payment. At the other extreme you would need 15%-20% down to be set up with private lenders or more if you wanted to remain with an institutional lender. If you want to complete an application I can tell you where you stand.

Dear Joe:
A consumer proposal is a form of bankruptcy so we typically suggest that it be paid in full and adequate credit be reestablished in order to qualify for a mortgage at the time you take legal possession of a home. A “rent to own” may be a good fit for someone in your situation, as it allows you to move into the home you will ultimately own and rent it until such time as you can qualify for the mortgage. You establish a purchase price for the home based on your time line to complete the transaction, so that gives you both the benefit of capital appreciation over this time period and allows you to decorate the home to your tastes etc., without investing money into a rental property. Our process starts with an application, so please email us for the application then complete and return it to us. Happy to answer any questions.

Dear Jack:
Entering into a private mortgage is no different than with a traditional lender. You would enter into a mortgage for a specific time period and at that time your mortgage would become due. The registration of the mortgage would be the same as with a traditional mortgage, handled by your lawyer. As with a traditional lender, there is no guarantee they will renew the mortgage at the end of the term, so you should have a strategy in mind to replace them if necessary.

Should for some reason the private lender decide to cease operations, you best case scenario is that they simply stop taking your mortgage payments and you in effect have a free mortgage, although I don’t see that happening. More likely they will sell your mortgage to another lender and your current terms and conditions will continue until the term is complete.

With both traditional and private lenders, if you default in your obligations to them, the mortgage may become due and immediately payable. In my experience, all reputable lenders will try to find a resolve before they force an early termination of a mortgage.

I am happy to clarify as required.