WHAT YOU SHOULD LOOK FOR IN A GOOD COMMERCIAL MORTGAGE LENDER

Mortgage agents and brokers in Canada have a vast opportunity in the area of commercial mortgage financing. Arranging commercial deals is highly profitable and it is a segment of the market that is much less competitive than residential mortgage financing. The reason it is less competitive is that many mortgage agents and brokers want to be able to offer commercial mortgage financing but don't know how. This is why having a strong partnership with a commercial mortgage lender is key.

Arranging commercial mortgages and seeing them through to funding will ultimately come down to the support offered by your commercial mortgage lender. Many major banks that offer commercial mortgage financing do not offer mortgage agents and brokers this support. Instead, they expect the mortgage agent or broker to know how to put together a commercial deal. This is a major reason why, despite interest, many mortgage agents and brokers shy away from commercial mortgages.

Like anything, getting up to speed on how to arrange a commercial mortgage will come down to practice, experience and, as I mentioned, a strong partnership with a commercial mortgage lender that will support you through the learning curve.

So what should you expect from a commercial mortgage lender?

Availability and Responsiveness - Your commercial mortgage lender should be available to take your calls and/or returns your calls within 24 hours. They should respond to your emails the same day and be available to discuss and offer a quote to you if you have provided them with the key information. If information is missing, they should help you to identify missing information so that your next quote runs even more smoothly.

Assistance and Education - Because most residential mortgage agents and brokers have little knowledge regarding commercial mortgage lending, they will often need help from start to finish. A good commercial lender, and particularly a good private commercial lender, will recognize this and provide required patience, direction and support.

A good commercial mortgage lender will provide you with a term sheet or conditional commitment within 24 - 48 hours of receipt of a proper package for underwriting and consideration of the transaction. They should also offer financing on a wide range of property types.

A big part of getting deals done is problem solving. Your commercial mortgage lender should be a deal maker and always be looking for ways to make your deal work. This may include, but not be limited to, the way the deal is structured, the interest rate, outside security, and alternative debt service or interest reserves.

If your commercial mortgage lender is a private lender, they should provide you with access to a decision maker or, if the commercial mortgage lender is an institutional lender, they should have a proven track record of getting results.

As we all know, the mortgage industry is very competitive and the more you diversify your ability to finance different types of mortgages, the more competitive you will be. Forging a strong partnership with a good commercial mortgage lender will help you achieve this goal.

If you are interested in learning more about commercial mortgage financing, or you are a commercial mortgage broker or agent already and would like more information about our programs, please contact Commercial Mortgage Team at First Equity at 416-440-1224 ext 22 or visit www.firstequity.ca

Commercial Construction Loan Financing Tips

Many brokers will encounter clients who require construction loan financing, some more than others. Commercial construction loan financing is usually required by developers and investors who purchase land that they would like to develop or are purchasing fully developed land in the form of a single or several ready to build lots. Land with an existing home or structure on it is most often referred to as “infill construction”. In the event that a builder is simply improving an existing structure including for example a top up (second storey) or remodelling, we refer to this type of construction as a renovation. All of these examples most often require construction funding and apply to either residential or commercial real estate.   

There are several different types of construction loans. When a builder or developer acquires land for development they will seek out a land loan often combined with a facility for land development. The land loan serves to close the land purchase while the development loan serves to fund the planning and development of the land so as to improve it for greater use such as residential or commercial zoning from agricultural for example. Following the acquisition and initial development a developer or builder will require financing to service the land which includes the installation of sewer, water and hydro and will require a land servicing loan. The next round of financing is usually to a builder unless the builder and the developer are one and the same. The builder will require a construction loan to build either a residential or commercial building.

Here are some quick tips you may want to keep in mind if you are representing a client who requires development or construction loan financing.

Lenders who offer construction loan financing will always hold back 10% from every advance in accordance with the Construction Liens Act save and except an advance on land. Borrowers need to be made aware of this for budgeting purposes at the outset to ensure that there is no confusion in the future.

It is important that your client has a good budget that includes a detailed breakdown of hard and soft costs and includes the interest reserve in the soft costs.

Be prepared to use a quantity surveyor whose job will be to approve the budget on behalf of the lenders and provide reports on progress of construction to the lender that certifies every advance in accordance with the budget. For smaller residential construction loans some lenders will use an appraiser to report on progress.

In almost all cases, lenders will lend construction loans on a “cost to complete” basis. This means that the funding program will be advanced in progress draws and will also be subject to 10% holdbacks in accordance with the Construction Liens Act as previously mentioned. This ensures that there is always enough money in the remaining budget to complete the project.

The presence of a first mortgage that was obtained for construction purposes can create a challenge if your client plans to obtain second mortgage financing as the second mortgage lender would be required to postpone every advance under the first mortgage or construction loan that has priority on title.

Offering commercial construction loans can be very lucrative for a mortgage broker or agent. An opportunity to arrange this financing is an excellent opportunity to learn about how you can diversify the range of products you are able to offer to your clients. Either co-brokering the deal through an experienced broker who specializes in construction financing or working with a construction loan financing lender who is willing to educate you and walk you through a project is a great way to gain experience and to be able to offer this type of financing to your clients.

For more information about construction loan financing please contact David Mandel at First Equity Financial at 416-440-1224 ext 22 or visit www.firstequity.ca  and www.firstsourcemortgage.ca

Ontario Commercial Mortgages – How to Find a Good Commercial Mortgage Broker

Ontario commercial mortgages are designed for businesses and/or investors who want to purchase or refinance an income producing commercial property. Commercial properties can include retail centres, condo developments, apartment buildings, office buildings, industrial properties, retirement homes, zoned land and more.   

Like residential mortgages there are many different types of commercial mortgages and many different types of commercial mortgage lenders. 

Commercial mortgage brokers can be a major asset to a borrower or residential broker or agent because commercial mortgages are complex. Commercial mortgage financing is a very specialized field and few brokers specialize in this type of financing. Even experienced residential mortgage brokers and agents will turn to a commercial mortgage broker as a trusted advisor and partner to help them get their commercial deals financed.

What should you look for in a commercial mortgage broker?

Flexibility – Your commercial mortgage broker should offer many financing options and be flexible.

Commitment – When working on complex financing there is nothing worse than working with a mortgage broker who is not there for you. It is important to establish a relationship with a trusted advisor and business partner that you can rely on. This means they should answer and return calls promptly and be prepared to be an advocate for your deal.

Resources – A good commercial mortgage broker will work with both banks and asset based lenders including private lenders. This ensures that if something changes in your deal there will be a “plan b”. They should also have a strong rapport with their lenders and be able to access decision makers on demand.

Range of Products – They should be able to offer you access to first mortgages, second mortgages, construction financing, mezzanine financing, joint venture financing, private lending and more.

Expertise – Your commercial mortgage broker should have substantial expertise and experience that one only comes by with many years in the business. Experience should include financing development and re-development projects, debt structuring as well as experience conducting project viability assessments.

Generally speaking commercial mortgages can be divided into one of two categories:

·         Owner occupied commercial mortgages – the owner of the property has his/her business occupying at least 51% of the space in the building that is to be financed.

·         Investment commercial mortgages – the owner of the property will occupy between 0% and 50% of the available space in the building that is to be financed.

A good commercial mortgage broker is a major asset to both borrowers and residential mortgage agents and brokers because commercial lending is specialized and relies on an acquired skill set.  Also lenders tend to be much more difficult to deal with when it comes to arranging commercial mortgage financing. They will want an abundance of detail about the security being offered. This could include the type of business the client is engaged in, business plans, business records, whether or not the building is occupied as well as rent roll, environmental report, building condition, and specific insurance detail. Outside of approving credit, they will assess the overall viability of the borrowers business.  Asset based lenders including private lenders tend to be somewhat more flexible because they lend more so based on the equity in the real estate rather than the character and credit worthiness of the applicant. A good commercial mortgage broker will know how to assess the application and identify potential issues before they become issues and propose viable and effective solutions to ensure that you are successful obtaining financing.

What to Look for in a Good Private Lender Who Offers Private Mortgage Financing

Private mortgage financing can be tricky, whether you are a Mortgage Agent, Mortgage Broker or a consumer looking for this type of mortgage financing. Typically people who need private mortgage financing don’t qualify for financing through institutional lenders for one of two reasons:

1.       They have problems with their credit

2.       They cannot prove their income in a way that is satisfactory to an institutional lender

The reason private mortgage lenders offer private financing to folks who have had problems with their credit or who cannot prove their income is because they are not lending the money based on the integrity of the borrower but on the integrity of the security. Private mortgage lenders will determine the amount of the loan based on a percentage of the appraised value of the asset.  

Generally, private lenders prefer to lend money on properties located in or around cities (as opposed to rural route properties) and will require sufficient equity in the property so that if the borrower defaults they can get their money back through the sale of the home. Usually private lenders will loan 75%-80% of the value of a home. 

The beauty of private mortgage financing is that private lenders are generally very flexible as long as there is equity in the property that will be used for security, so for example, if your property was not in a desirable area or in a desirable condition, the private lender may still offer private mortgage financing on the basis of the equity the applicant has in the home, the more equity the better.  

There are different types of private lenders, ranging from individual people who are just looking to earn some additional investment income all the way up to organized groups of investors who offer private mortgage financing as a business. It is usually recommended to obtain private mortgage financing through a mortgage broker who specializes in private mortgage financing, even if you are another mortgage broker or agent.  

One reason for this is that you want to be able to preserve your relationship with your client. Private folks, especially seniors, who loan money through their solicitors can be unreliable when the changes to life occur. Private mortgages are generally renewed annually. This unreliability could include the private individual not wanting to renew the mortgage in the future because their financial situation changes and they need their money back or perhaps they pass away and then what? 

Working with a Mortgage Broker who has an organized process for arranging private mortgage financing, administers private mortgages that they arrange and work with their private lenders in volumes will help you to avoid unreliability with the private mortgage lenders you place your client with.

Private mortgage financing is a fantastic tool that can be leveraged by individuals to achieve many financial goals including debt consolidations, renovations and more. Private mortgage financing really helps the people who need it most but the key is to find the right private mortgage financing from the right private mortgage lender. 

If you would like more information about what to look for in a good private lender please contact David Mandel at 416-440-1224 ext 22 or visit www.firstequity.ca.

Consolidate Maxed Out Credit Cards Using Your Home – Post-Holiday Spending Tips

During the holiday season many families will turn to credit cards to finance Christmas expenses. This makes it less stressful to make ends meet, especially during the holidays. Sometimes we don’t even realize how much damage is done until the credit card bills start to arrive in January. 

Credit cards are very convenient but have their pitfalls. Credit cards bear very high interest rates, often more than 20% interest and in the case of department store cards up to 30%. Interest is calculated monthly so if you get caught up in a pattern of only making minimum monthly payments, they can take years to pay off. Credit cards that have balances more than 75% of their limits will damage your credit rating/credit score.  

The last thing you want to do is go into the next holiday season with credit cards that have balances from the spending you did the past holiday season. The best thing to do if you have accumulated balances on credit cards from holiday spending is to consolidate maxed out credit cards using your home. 

There are many reasons why it is a great idea to consolidate maxed out credit cards using your home. Here are just a few: 

1.       Using your home to consolidate maxed out credit cards will enable you to start the New Year on a fresh foot and with a single monthly payment. 

2.       Using your home to consolidate maxed out credit cards will increase cash flow because a home equity loan or line of credit will bear a much lesser payment than what you are paying to your credit cards on a monthly basis. 

3.       Using your home to consolidate maxed out credit cards will reduce the overall interest that you are paying to loans and credit cards. Home equity loan and home equity line of credit interest rates are much less than what you are paying to your individual credit cards. 

4.       Using your home to consolidate debt will improve your credit because all of your credit card balances will be reduced to zero and the less debt reporting to your credit report, the higher your credit score will be. Also, as we mentioned when credit card balances exceed 75% of your limits, it reduces your credit score and will trigger a message to appear on your credit report that indicates that your credit card balances are too high in proportion to your credit limits. 

It is important that if you consolidate your maxed out credit cards using your home equity that you don’t continue to use your credit cards. Put them away and only use a single card and make sure to use the card in denominations that you can afford to pay off in full each month. This will ensure that you don’t find yourself in the future with a new payment on a consolidation loan and paying credit card balances. 

Start your New Year off with your finances in order and without the stress of having to pay a windfall of credit bills. For more information about how you can consolidate maxed out credit cards using your home and post-holiday spending tips visit www.firstequity.ca or contact David Mandel at 888-455-5774.

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.