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.

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.

Toronto Homeowners Consolidate Debt before the Holidays

The holiday season can be crazy with all the planning that goes into family dinners, gift exchanges, holiday parties and then there is the actual holiday itself. Whether you celebrate Hanukkah, Christmas, Eed or another religious day/period, this holiday season one thing we all face in common is the expense that comes with the holidays and preparing to begin the New Year with our budgets, finances and credit intact.

Some Torontonians rush to complete their shopping, use their credit frivolously with the idea that they will deal with the repercussions in January. Some Torontonians have accumulated so much debt in the past few years, during the troubled economy, that they are wondering how they are going to pull the holiday together at all.

There is a clear answer. Instead of being overwhelmed by the holidays, embrace not only the holidays, but use the holidays as a way to tackle your financial challenges so that you can enter the New Year with more cash flow and strong financial goals.

If you own your home, refinancing over the holidays could be the best choice to clean up your credit and start the New Year on a fresh footing. Many Toronto Homeowners have used equity in their homes to obtain low rate lines of credit and other secondary home equity financing. Others have refinanced their existing mortgages to consolidate debt so that they can start the New Year with a single low monthly payment.

You see, if you own a home in Toronto, refinancing your mortgage or obtaining a new home equity line of credit is not as complicated as you probably think and can be completed in 2-3 weeks. Home equity loans and lines of credit are typically less interest than the unsecured credit products and offer more flexible repayment options.

From all of the staff at First Equity Financial we wish you and your family a safe and happy holiday season and all of the best in the New Year. For more information visit www.firstequity.ca.

Toronto Homeowners Qualify For Mortgage Financing To Pay Off Consumer Proposals.

If you are in a consumer proposal and own your home, good credit may be closer than you think. If you have some equity in your home, there are lenders that will consider extending you a mortgage IF the consumer proposal is paid off in the process.

A consumer proposal stays on your credit for 3 years from the date it is paid in full, so the faster you pay it off, the faster it will be off your credit. If you were in a 4 year consumer proposal and made the payments over the full 4 years, the proposal would remain on your credit report for a total of 7 years.

You cannot expect to walk into a bank or finance company, in a consumer proposal and qualify for any credit. Finding a lender that offers mortgage financing to a consumer who is in a consumer proposal will involve a relationship with a good mortgage broker.

Mortgage brokers deal with private individuals and businesses that invest in real estate and are licensed to arrange mortgage on behalf of these private investors. Normally, private investors will only loan money to a consumer who is in a consumer proposal on an equity basis.

In effect, the more equity you have in your home, the more likely you will be to qualify for the mortgage refinancing you will need to pay off your consumer proposal.

If you refinance your home and pay off your consumer proposal, you can begin re-establishing your credit immediately. You can start off by obtaining a secured credit card that will report to your credit report.

Two years after your consumer proposal is paid off and with two years of strong re-established credit, you may qualify for mortgage financing at the bank again! Remember, after 3 years all existence of the consumer proposal will disappear from your credit report.

For more information about qualifying for a mortgage to pay off a consumer proposal. Visit www.firstequity.ca.

Stop a CRA wage garnishment! Your home equity could be the answer.

If you are a homeowner and the CRA is garnishing your wages, there are ways that you may be able to raise the capital to pay off your income tax debt and move forward with your life.

If you have a tax problem you may have gone to an accountant or even a lawyer. The bottom line is if you have a tax debt and you know that you owe the money and simply can't pay it, what you really have is a financial problem.

Those who find themselves in the unfortunate situation of having their wages garnished by the CRA, often experience both financial and personal consequences that include financial hardship and personal embarrassment.  

Many homeowners in this situation don’t think that they have options because they have gone to their bank and as soon as they mentioned that they have a tax debt they were promptly declined for credit.

The thing is, if you own a home you have more options than your bank, before you give up on seeking the funds to pay off your CRA income tax debt.

Consulting a mortgage brokerage that specializes in helping consumers with tax debt is your first step. A qualified mortgage broker in Toronto will be able to access different sources of mortgage funding that include trust companies, finance companies, mortgage investment corporations, private lenders and more.

Depending on your credit, employment type, provable income and amount of equity you have in your home, there are other companies who may lend you money at affordable low mortgage interest rates and flexible mortgage terms.

If you have bad credit or can't prove your income, you will simply require more equity.

Paying your CRA income tax debt in full is by far the fastest and most effective way to stop a wage garnishment, while preserving your credit. For more information about how you can use your home to stop a wage garnishment please visit www.firstequity.ca.

How to Qualify for a Mortgage in Toronto – Common Mortgage Qualification Issues

By David Mandel, Principal Broker and CEO of First Equity Financial Group

Operating a Mortgage Brokerage in Toronto, one thing that I see often is folks who have the dreams and ambitions to own a home.  Only, with fast changing economic conditions, Toronto banks and Toronto finance companies often change what they require in order to qualify for a mortgage. In January your financial situation may have been acceptable to the bank but now it’s not.

We refer to this as the ever-narrowing mortgage box. The truth of the matter is that hundreds of loan programs exist in Toronto for people who do not fit the conforming box. Below are a few examples of some specific of problems that Canadian consumers encounter when trying to qualify for a mortgage in Toronto. We have also included some tips how you can overcome these challenges.

1. My debt-to-income ratio is too high
SOLUTION: There are many loan programs on the market today which feature "expanded criteria" allowing higher debt-to-income ratios for qualifying purposes. While some of these programs come with premium pricing, others do not, and offer the borrower a viable source for getting a loan. Mortgage brokerages often have ready access to equity and or private lenders who allow for expanded ratios. However, fees are usually charged for non-conforming mortgages and mortgages arranged where little or no documentation is available or is inadequate. Most of these programs come at a higher price than conforming loans but offer a loan source for individuals who do not qualify through any other program.

2. I don’t claim all of my income on my financial statements
SOLUTION: If you are self-employed or derive some or all of your income from commission or tips, your financial statements may not reflect all of this income, or you may counter-balance this income with expense write-offs. In this instance, a “stated income” or “no-income” verification loan may help you qualify. With sufficient down payment and adequate credit, the lender will not verify the income stated on your application.

3. I have poor credit history
SOLUTION: The “Non-Conforming” or “B /C” market is one of the fastest growing in the mortgage industry. A program exists for nearly every credit problem including bankruptcy and foreclosure. Rates for these programs are typically based on the borrower’s previous 24 months credit history. Mortgages are available at competitive rates.

4. I have little or no money for a down payment
SOLUTION: Insured loan programs and combination first and second mortgage programs allow for residential home purchases with as little as 5% down payment

5. I have little or no established credit
SOLUTION: Many lenders will accept “alternative credit references”. In these instances, the borrower may need to provide references or proof of payment for things such as rent, electric, water, or insurance. Assuming adequate payment history, many first-time homebuyer programs will accept these references as sufficient credit history.

For more information about how to qualify for a mortgage in Toronto visit http://www.firstequity.ca.

Construction Loans and Home Improvement Financing

For many individuals, adding a pool, an addition to the home or making repairs, requires the use of a mortgage. There are many ways that you can use your home to finance construction projects and home renovations. Obtaining a mortgage loan to finance your construction project or home renovation is often the most affordable route offering the most flexible financing options.

If you are thinking about seeking a construction loan, home renovation loan or mortgage, here are variables that you should consider:

1.       Depending on the required loan amount, a home-equity line of credit (HELOC) may be the most cost-effective option. Home equity lines of credit; typically carry lower interest rates when the loan is less than 75% of the home value. A fixed rate loan program is available at higher interest rates and is available to 90% of the home’s value. For this reason, home equity lines of credit and some fixed rate second mortgage financing work best for smaller loan amounts that will be paid off in a reasonably short period of time.

2.       Borrowers who need larger loan amounts and who intend to keep the outstanding balance for a longer period of time may want to consider refinancing their first mortgage, paying off the existing balance and increasing the loan in an amount sufficient to pay for the improvements. While this option will most likely require the borrower to pay closing costs, the benefit of this option is usually a lower interest rate over an extended period of time than is typically offered by other Home Improvement loans.

3.       Construction or Construction/Permanent loans are best suited for extensive renovations requiring multiple draws to contractors or labourers. Draws are usually set up monthly and are subject to at least a 10% holdback of funds in accordance with “construction liens” laws. In addition, many lenders prefer to fund these draws on a cost-to-complete formula where the funding program insures that there is always enough money remaining after each draw to complete the project in the event of a problem or default. Each time the contractor requires a draw an architect, engineer or appraiser is called in to determine the value of the work in place and the remaining work to be completed. The lender will use this information to determine the amount of the draw that will be advanced. These loans are usually set at a float rate of 1 to 3 above bank prime for non-private funding and may contain a permanent (take-out) mortgage which comes into effect once the construction is complete and beyond the 45 day construction liens period.

In many instances, the lender will require plans and specification for improvements. Lenders will also require an appraisal of the subject property reflecting the value of the improvements in the new valuation.

There are so many lenders out there that include banks, finance companies, mortgage investment corporations and private lenders. Depending on your credit standing and the equity in your property, if you are planning a construction project or a home renovation, you likely have many financing options. For more information visit http://www.firstequity.ca or call (888) 455-5774