Industrial Mortgages and Commercial Mortgage Finance in Ontario

Commercial Mortgage Finance in Ontario includes several property categories and is a specialized field of financing. Each type of commercial financing involves not only different types of financing but also different types of properties and verification methods.

Commercial Mortgages can be complex so it is risky business for an individual to go directly to a lender for one of these mortgages because there is so much involved over the course of the closing that the chances of not satisfying all of the lenders conditions are high. Even Mortgage Agents and Brokers turn to Mortgage Brokers who are specialists in commercial mortgage finance in Ontario to ensure a solid approval and smooth closing for their clients.

The property and mortgage financing types that fall under the commercial finance umbrella are:

·         Apartment Financing

·         Health Care Facilities Financing

·         Industrial Mortgage Financing

·         Warehouse Financing 

·         Retail Structures Financing 

·         Office Complex Financing and more.

Each property type will require different financing, with different requirements and conditions.

Where industrial mortgages and commercial mortgage finance in Ontario is concerned and because of the nature of the use of the property, industrial mortgages tend to be harder to locate and secure than typical commercial mortgages – for the average Mortgage Broker or Agent.

Industrial mortgages are usually arranged on Industrial Malls, Industrial Condominiums, Warehouse Buildings, Plants and Industrial Parks.

The challenges as they relate to obtaining an industrial mortgage are because industrial mortgages financing calls attention to the nature of the property usage, zoning, environmental impact, and location.

Generally when attempting to obtain an industrial mortgage in Ontario you will need:

1.       Property location and specifications

2.       Building appraisal and property survey

3.       Relevant industrial experience

4.       Credit history

5.       For an existing business, the previous two years of accounts

6.       For a new business, a comprehensive business plan detailing income projections

7.       Environmental reports

8.       Legal clearances

9.       Proof of tenants or tenant leases

If you cannot satisfy one or more of the above noted requirements and you have a good Commercial Mortgage Broker you should be fine. Mortgage Brokers who specialize in industrial mortgages and commercial mortgage finance in Ontario generally have access to AAA lenders as well as private lenders who can be called upon in a situation where issues arise.

The key is to be prepared if you plan to seek out an industrial mortgage. Here are some steps you can take to ensure that you are successful:

1.       Establish a relationship with an experienced Commercial Mortgage Broker (even if you are a general Mortgage Agent or Broker) – they will be able to apprise you of what will be needed to get your deal done and will ensure a smooth mortgage closing.

2.       Make sure you have your ducks in a row. The more conditions that you satisfy in terms of what an AAA lender will be looking for, the higher the likelihood that you will get the most competitive deal.

3.       Don’t look at a property that’s more trouble than it's worth. Now that you know that an industrial mortgage will be impacted by its location, usage, zoning and will require an environmental impact report – keep those issues in mind when looking at industrial property locations.

For more information about industrial mortgages and commercial mortgage finance in Ontario please contact David Mandel at First Equity by calling (416) 440-1224 ext 22 or visit www.firstequity.ca.

Subprime Mortgage Financing in Toronto – How to Find a Good Private Mortgage Lender in Toronto

      Subprime mortgage financing in Toronto is the type of financing you may look for if you have bruised credit or difficulty proving income. Subprime financing is usually offered by finance companies and private lenders.

      When a consumer has struggled with credit or cannot prove their income, it makes finding mortgage financing in Toronto more challenging. Most banks and prime lenders have lending criteria that includes a minimum credit score (usually 680 is the minimum), low debt service ratios (the proportion of your monthly payments to housing and debt in proportion to your income) and require that you can prove your income by way of a paystub and if no paystub is present, your tax returns.

This can present a challenge for self-employed, especially because most banks will only consider the net annual income you declared to the Canada Revenue Agency and will not consider your gross business income or expenses.

Where mortgage financing is concerned, there are two primary differences between prime and subprime mortgage financing in Toronto. The first is mortgage interest rate – a prime rate mortgage is often lower than a subprime mortgage interest rate. The second is the amount of equity you will need to have in your home to qualify for a mortgage. Lenders who offer prime mortgages will often loan up to 9% of your home's value on refinance, whereas a subprime mortgage lender will often want to lend less than 80% of the value of your home.

A subprime mortgage is often also referred to as an equity only mortgage. The private mortgage lender is not lending to you based on your credit or income but rather they are lending to you based on the security you have to offer. The security being the amount of equity you have in your home.

If you find a good private mortgage lender, you can still obtain competitive mortgage financing which can help you resolve debt that has become out of control, or bridge a much needed gap in the event you are selling a home, buying a home or have a home renovation that has gone over budget. A relationship with a good private mortgage lender can provide you with the ability to obtain financing when you need it most.

Some mortgage brokers offer private mortgage financing. It is important to ask if they themselves are loaning you the money or if they are obtaining the money from a private individual that is outside of their professional network. Working with a Mortgage Broker who also loans their own money (or lender within their professional network) is your best choice. The reason why is because they will have more control over what happens when the mortgage is funded or is subsequently up for renewal.

Finding a good private mortgage lender will be the result of asking lots of questions. Since the recession in 2008, private mortgage financing can be harder to come by but is still available if you have the right connections. If you would like more information about subprime mortgage financing in Toronto and how to find a good private mortgage lender in Toronto please contact David Mandel by calling (416) 440-1224 or by visiting www.firstequity.ca.

Mortgage Underwriting Due Diligence Creates Mortgage Intelligence Beyond Your Imagination

In the mortgage business, mortgage underwriting and due diligence work hand-in-hand. Having the right mortgage intelligence could be the difference between a mortgage closing and not closing. There are so many reasons mortgages that appear to qualify don’t end up closing.

Most of the time, our customers do not intentionally mislead us and simply do their best to provide us with the information that we ask for. The mortgage intelligence we receive is a direct result of the questions we ask and how we interpret our customers’ answers.

When a mortgage application goes to the mortgage underwriting department at the financial institution you choose. They will perform due diligence that could include a search on Purview which is a tool offered by Teranet that tells the lender the approximate value of the property in question. They may pull a property title search to validate the information on title. They may also verify existing mortgage information with the customers’ bank before issuing an approval.

So the question is how can we mitigate the number of deals that fail to close?

First, the pre-qualifying questions we ask are key - here are some examples of the types of questions that you can ask to ensure that you have all of the correct mortgage intelligence needed to close your deal.

When you ask the client what their property is worth, ask them when they purchased the property and what they paid for it. If the purchase date was within 5 years of the date of the mortgage, likely the value hasn’t changed much and accordingly the balance is likely very close to what it was at the time of purchase.

If a customer tells you that there has been a vast increase in property value because they painted or did some landscaping, these are not the types of things that result in a drastic increase in property values. Things like an additional bathroom or a new kitchen are the types of things that would be expected to yield a slight increase in your client’s property value.

Finally, spending a little bit on a property title search when taking on a new client may save you huge in the long run. A title search is a mortgage underwriting due diligence tool that will tell you who is on title and also that mortgages are registered on the property and if there are any liens on the property. This type of information often rears its ugly head on closing which costs you, your lender and lawyer, time and money. This can be avoided with the right mortgage intelligence.

For more information about mortgage underwriting due diligence to create an enhanced level of mortgage intelligence, please call David Mandel at First Equity Financial by calling (416) 440-1224 ext 22 or by visiting www.firstequity.ca

Toronto Mortgage Agent Handbook – How to Pre-qualify a Commercial Mortgage for Maximum Results

Being that for the past 20 years we have been specialists in complex mortgage financing in Toronto, we decided to write a series of articles, hoping to help other Mortgage Agents and Brokers get their complex mortgages financed. We are calling it the Toronto Mortgage Agent Handbook and this article will focus on commercial mortgage financing.

Commercial mortgage financing is very different in comparison to residential mortgage financing. Many lenders who offer residential mortgage financing do not offer commercial mortgage financing and many lenders who offer commercial mortgage financing do not offer residential mortgage financing.

Commercial mortgage interest rates are priced higher. The reason for this is that a commercial property is a greater risk to a lender than a residential one. It’s a greater risk because the number of individuals looking to purchase a residential property is much greater than the number of individuals or businesses who seek to purchase a commercial property. Also, because part of a commercial properties value is based on the income it can produce. If it is not producing income or other commercial properties in the area have leased their units for less, it will reduce the value of a commercial property.

The down payment/equity requirements to finance or refinance a commercial property are greater for the same reasons that they often bear a higher interest rate than a residential mortgage. Income verification requirements can also be more rigorous.

A commercial mortgage will require an AACI appraisal, which is a commercial appraisal that determines the property value using the 3 approaches to value. However, lenders typically place the greatest emphasis on the income method. An AACI appraisal is often 4-5 times more expensive than a residential appraisal and this is simply due to the complexity of the assignment. For example, a 5-plex would be considered a commercial property and would require an AACI appraisal. Part of its value would be determined by the rent it produces. If units in the 5-plex are vacant, the value of the property will be less.

Generally, Mortgage Agents will focus on a specific type of mortgage financing, most specialize in either prime or subprime residential mortgage financing. What do you do if someone applies for a commercial mortgage which is not your area of expertise? The answer is simple.

When you go into the mortgage business, just like it is important to establish a relationship with banks, and other lenders, it is just as important to establish relationships with other Mortgage Brokers who specialize in complex mortgage financing. Commercial mortgages often yield higher broker fees than residential mortgages. For example, if you establish a relationship with a commercial Mortgage Broker, one who specializes in Commercial mortgage financing, they can provide you with valuable information, such as:

1. How to pre-qualify for a commercial mortgage.

2. What to look for.

3. What to quote, if you think you have an applicant who qualifies.

At this point, if a commercial mortgage opportunity comes up, you can co-broker the deal and in many cases you will find that your half of the fees will be greater than what you would have earned on a residential mortgage. For more information about how to pre-qualify a commercial mortgage for maximum results please visit www.firstequity.ca or call David Mandel at 416-440-1224 ext. 22 to set up an appointment.

Co-brokering Mortgages in Toronto - Mortgage Brokers Provide Support for Toronto Mortgage Professionals

In Toronto, the mortgage industry is extremely competitive. A mortgage broker or mortgage agent is only as successful as his/her resources.

We all hope to get cookie cutter deals and great deals do come along. Customers with good credit, income and equity are ideal.

However, how often do you get deals where the client has mortgage arrears, problem credit or can’t prove income and because of this the usual suspects (banks and trust companies) just don’t seem to want to play ball? The answer is more often than not, I know, I have been in the business along time.

Co-brokering mortgages in Toronto is the best way to retain deals that you otherwise may not have. Co-brokering is where you find another mortgage broker or mortgage agent who has funding resources or lenders that you don’t. You negotiate a “fee split” with the other mortgage professional at which point they can obtain the funding and assist you with closing the deal. Co-brokering deals enables you to help more clients and provides your clients with better service.

Look at high profile trials. When a lawyer takes on a high profile client or a client who has a very complex legal matter, they will assemble a legal team, often calling a lawyer with many years of specialized experience to the table. A great example of this was the recent Casey Anthony trial. Jose Baez did not try the case on his own; he brought Cheney Mason to the table as co-council.

In Toronto, power of sale, really bad credit, construction/commercial mortgages and mortgages for self-employed individuals are all examples of complex mortgages. If you are new in the business or generally handle “A” business, these types of deals may feel challenging to deal with.

Generally you will get the most value by establishing co-brokering relationships with mortgage brokers who are established and have been in the business a long time (more than 15 years). You will get the most value because they will have established resources and many years of handling a variety of different complex deals under their belts. They will be able to mentor you through your deals and who knows, in the future you may choose to pursue a mortgage specialty. For more information about Toronto mortgage brokers who support other mortgage brokers, please visit www.firstequity.ca or call David Mandel at 416-440-1224.

Summer Renovations? Finance Home Renovations at Terms You Can Live With!

Summer time is the perfect time to complete must needed renovations around the home or cottage. Whether it is for a new deck, finishing the basement or a pool – home renovations can get expensive.

The best thing to do if you are planning a home renovation is to start off with a budget. Compare pricing on materials and even consider getting an estimate by a contractor. Sometimes trying to save money in the short term by doing it yourself can cost you way more in the long run. Also usually contractors can actually get the best deals on materials.

you decide to do the work yourself, outside of researching the cost of materials, you will also need to research permits. Most of the time, something as simple as taking down a wall or adding a door, requires a permit. Once you have finished researching cost and materials, you can then research financing.

The best thing to do if you are considering home renovation financing is to be realistic about what the total cost will or may grow to be. One big mistake folks make is when they start buying materials and items through various credit cards, a sort of “buy as you go approach”. This can be catastrophic and often results in folks running out of money before their project is completed.

Another issue with financing renovations on credit cards or line of credit products is that the interest is usually high so it can take forever to pay them off.

The best course of action if you are planning a renovation project that requires financing is to use your home to finance your renovation. You can refinance and take out a line of credit or second mortgage or even refinance the cost of the renovation into your first mortgage.

If you refinance your mortgage and take out a second mortgage or line of credit, it will stand independent of your first mortgage. This means it will have a separate monthly payment and its own repayment terms. You can be as aggressive as you want with the amortization so that you ensure the debt is paid off as soon as possible. For example, a $20,000 mortgage at 12.99% interest amortized over 5 years only bears a monthly payment of $450 per/mo and the debt is paid off in 5 years.

Don’t wait until you have maxed out all your credit cards and are frantically looking for a way to finish your project and pay off the debt. Plan your project properly from the beginning and you will not only complete the renovation you’ve been dreaming of but also at a price and terms you can live with. For more information visit http://www.firstequity.ca/

Home Improvement Loans Can be Used to Finance Improvements to Increase Your Home’s Value.

There are a number of things you can improve in your home that will increase your home’s value. You can add a bathroom, finish your basement and renovate your kitchen – just to name a few.
Unexpected home improvements like a new roof can be an expensive surprise.
Rather than waiting until your home is in need of repairs, consider a home audit to look for ways that you can improve your home and increase its value.

Home improvement loans are now available at historically low rates. The best way to obtain a low rate home improvement loan is through a mortgage. Using your home as security will enable you to secure lower interest rates than if you used an unsecured line of credit.

The type of home improvement loan you should apply for depends on the size of improvement you want to finance. A small renovation of $15K-$30K could easily be financed through a home equity loan or line of credit.
If you are financing a large renovation, refinancing your first mortgage may make more sense.

If you have had issues with credit, are self-employed or cannot prove your income, this will make things more difficult. These three things make you a higher risk to a potential lender; in turn you will need to have equity in your home.

Before you prepare to apply for renovation financing, consider what other existing debt you have. This may be a good time, if you are going to refinance your mortgage, to consolidate your debt. This will free up cash flow and reduce the interest you are paying on existing credit cards.

The next thing you may want to do is consider requesting your credit report from Equifax. This way you can see what lenders will see before you even begin looking for home improvement refinancing. If you can find places to improve your credit (for instance paying down a credit card balance that is close to or at its limit), do it. This could save you big. The stronger your credit is, the lower the interest you will pay.

Even in cases where consumers have bad credit, the interest for a bad credit home improvement loan or refinanced mortgage is still less interest than bad credit loans offered by finance companies. If you are thinking of financing a home improvement using your home, consult a mortgage broker. They will be able to discuss your financial options and negotiate the best deal for you. For more information visit http://www.firstequity.ca or call 416-440-1224 ext. 22.

Equity Mortgage? You Hear About Them all the Time, but what are they?

Equity in the context of mortgage financing is defined as “the market value of a debtor's property in excess of all debts to which it is liable”.

The more equity you have in your home, the less risk that you represent to a perspective lender. Folks who have bad credit or difficulty proving their income will require a larger down payment to purchase a home or more equity in order to refinance it, then someone who didn’t have these issues.

The reality is that there is such a large percentage of the population who have accumulated an unmanageable amount of debt, have had issues with credit, or are self-employed with difficulty proving their income; that some lenders will offer an “equity mortgage” or “equity only mortgage”.

In these circumstances the lender will base their decision solely on the amount of equity in your home and not look at your income, debt load and credit products. Most lenders will not grant a high risk equity only mortgage that exceeds 80% the value of the home.

Also an equity mortgage will bear a higher interest rate, than prime rate mortgages offered by the bank. Equity mortgages are offered by a number of different types of lenders. These include mortgage investment corporations, trust companies, finance companies and private individuals.

Obtaining a refinance equity mortgage is a fairly simple process and goes as follows:
- Mortgage application is made
- Mortgage application is preliminarily approved
- Appraisal of the property is ordered and mortgage statements
- Applicant signs mortgage documents
- Applicant signs documents with the lawyer
- Funds are dispersed

The entire process takes approximately 2-3 weeks. A relationship with a mortgage broker who also lends their own money is a huge benefit. This eliminates layers of referrers that ultimately results in more fees to you. Ontario Mortgage Brokers like First Equity specialize in subprime equity mortgage financing and also lend money too. For more information visit www.firstequity.ca or call David Mandel at 416-440-1224 ext 22.

How to Get Approved for a Commercial Mortgage Financing in Ontario – A Mortgage Brokers Commercial Mortgage Checklist

Commercial mortgage financing and commercial loans in Ontario are specialized fields of financing.

If you operate a Corporation, you would hire a Chartered Accountant to file your tax returns; and not a general accountant.

In that same vein, if you need to apply for commercial mortgage financing or a commercial loan, it is best that you deal with a Mortgage broker who specializes in Commercial Mortgage financing. If you are a Mortgage Agent or Broker who specializes in residential mortgage financing, you too can benefit from the guidance of a Mortgage Broker who specializes in Commercial Mortgage Financing.

To be approved for a Commercial mortgage, the lender will require a lot of information to process the application. You will need to:
- Provide an explanation of what you are seeking to accomplish through the Commercial Financing
- Provide the desired loan amount
- Indicate if you are requesting debt, equity, or both
- Provide a complete property description that includes the location, size, current entitlement status
- Provide status of approvals including correspondence
- Indicate the amount of funds that are actually needed for the project and the percentage of the project these funds represent
- Indicate the amount the borrower is going to invest in this project

If the project involves real estate development, you will be required to provide:
- A list of the hard and soft costs for all phases (provide a spread sheet with a detailed construction/servicing budget)
- The future value upon completion
- Project time frame
- Rate of absorption
- Total build out

If there is a retail or office component to the application, you will also have to indicate pre-leasing information and provide a rent roll. Leases will be required later.

If the Commercial Mortgage is required to purchase a commercial property you will also need to know the purchase price, down Payment amount, seller carry, contract/REP- C expiry date.

You will also need to provide:
- Use of Funds - (Or provide a spreadsheet)
- Projected cash flow noting sales and estimated draw down on construction facility
- Pro – Forma Income statement
- An explanation of the business and/or borrower’s financial history for the past 3 years
- Previous operating history, if applicable and a list recent projects
- A P&L for the business if one is available
- Personal financials for the borrower

Finally, you will also have to indicate:
- Whom is signing the loan
- Any critical dates that must be met for this project
- If there is an appraisal. If yes, the date of the appraised value. If there is no appraisal how was the value determined?
- If a 3rd party independent feasibility study or appraisal was completed
- If other properties can be used as collateral. If so, what is the type of property, value and are there any existing liens?
- Your credit status. Do you know your credit score?

It is clear that obtaining approval for commercial financing in Ontario is quite an undertaking . Seek the guidance and representation of a professional who specializes in this field. For more information please visit www.firstequity.ca or call David Mandel 416 440 1224 ext. 24.

How to Qualify for Low Rate Loan Construction Financing in Toronto

If you want to finance a Toronto construction project, you may have already done some research and learned that construction financing is much more complicated than conventional mortgage financing. There are a lot of really great deals out there but if you do not dot your “I’s” and cross your “T’s” it can get really expensive.

The best type of professional to guide you through the process is a local mortgage broker who specializes in construction financing. If you are seeking to finance a construction loan in Toronto, seek the assistance of a Toronto Mortgage Broker. This can get tricky because the majority of mortgage brokers specialize in residential mortgage financing. Even a residential mortgage broker, who wants to get into construction loan financing, benefits from a relationship with a mortgage broker who specializes in construction loans.

How do you ensure you are dealing with a mortgage broker who is a construction loan specialist?  Ask lots of questions and do a little bit of research. Here are some tips.

1.       Visit their website. Is a large portion dedicated to useful information about construction loan financing? Are there client testimonials?

2.       Google them. Other customers may have posted reviews about their service and you can see if they are a leader in their field by how many results come up on the search engine under their company name.

3.       Call them and ask them about other construction financing projects that they have completed and ask for references.

4.       Visit the FSCO website to confirm that they are licensed.

5.       What types of properties can they finance? (residential single family, small or large subdivision, commercial, industrial).  A mortgage broker who specializes in construction loan financing should know about all areas of construction loan financing.

6.       Construction financing is as much an art as it is a science. Advances are made in progress draws in relation to work that has been completed.

If you are planning on applying for a construction loan here is what you are going to need: a site plan, building plans, a building permit (if available), a construction budget with a breakdown of hard and soft costs, a detailed cash flow with dates and advance requirements, construction contracts, builders resume and history of recent projects, a marketing plan and brochures if the final product is to resold in which case you may also require some pre-sales , a copy of typical purchaser agreement with all schedules, projected sale prices or rental rates with comparables and competitor details, presale details and estimated sell up time and completion date, offers to lease (if pre-leasing) or if it is a condominium, a copy of condominium application and/or draft documents.

Once you have found your mortgage broker that specializes in construction loan financing, they can guide you the process and help you obtain the financing that you will need to achieve your dreams. For more information please visit www.firstequity.ca or consider the services of David Mandel, a Toronto Mortgage Broker who has over 20 years of experience specializing in commercial mortgages and construction mortgages. David Mandel can be reached by calling 416-590-9800.

How to Deal with Holiday Financial Stress and Prepare for the Credit Card Bills that are Coming in the Mail.

With the inception of the first credit card in 1953 has come 58 years worth of charging our Christmas shopping on our credit cards and then paying the consequence in January when the bills roll in. The question is, what is the best way to deal with your credit card debt after the holidays? This really comes down to how much damage you have done.

If this is your first time using credit to finance the holidays, your balances are likely negligible and so you should just divide them into 3-4 monthly payments and try to hammer them down. Do not resort to minimum monthly payments no matter how low and tempting they may be as you will likely still owe the same balance once next Christmas has rolled around.

If you have accumulated a lot of credit card debt over the years and are making minimum payments, it's time to seriously think about consolidating. If you own your home this is likely one of most affordable ways to raise the money to consolidate your credit card debt.

There are many different types of home equity products to choose from. You could obtain a home equity loan, a home equity line of credit or if you have a lot of debt, you could refinance your first mortgage to pay off your debt.

Your best bet is to work with a local mortgage broker who can present you with many options as opposed to going directly to a bank where they can only offer you their products and services. You will also need to give consideration to the steps you will take to avoid going into debt with your credit cards again. The benefit to consolidating coming into a new year is that you can also formulate a plan to save for next year's holiday spending.

For more information about how to deal with holiday financial stress and prepare for the credit card bills that are coming in the mail, visit www.firstequity.ca.