More difficult lending environment ?

[Nir]

Hello Peter and Thomas,

Latest update you can get - from this month, just approved: variable Prime+0.5% 5 years term.
and a lot down required (but a lot down due to a different reason so does not mean anything).

Also, as a continuation of my response from page 2: hope you`re sitting down - Royal Bank offered 8%(!) fixed rate for 3 years for an EXCELLENT property!

Are they crazy?

Terrible conditions I could obviously not afford. I was lucky to find the above rate (Prime+0.5 as mentioned) from a smaller bank on time and not lose the deal/property. (Yeah!)

Regards,
Neil

 

[willy]

Seems pretty obvious from whom the banks are trying to recoup the loses of THIER bad investments. 8%

 

[JimWhitelaw]

Hi, new REIN member here. We just closed on our first investment property Oct 1. Working on another deal now, terms are very different from one month ago. Aside from the prime+ variable rate, we`re also being told by RBC that they won`t do 35 yr amort on investment property; 25 yr max. So far, relationship with RBC has been good. Should we be shopping for another lender that will offer 35 yrs or has everyone cut back on the longer amortizations?

 

[GarthChapman]

Other lenders are still doing 35 year amortizations on revenue properties. Check with your Mortgage Broker regarding who is offering what.

 

[PeterKinchMortgageTeam]

QUOTE (CLW @ Oct 21 2008, 02:54 PM) Hi, new REIN member here. We just closed on our first investment property Oct 1. Working on another deal now, terms are very different from one month ago. Aside from the prime+ variable rate, we`re also being told by RBC that they won`t do 35 yr amort on investment property; 25 yr max. So far, relationship with RBC has been good. Should we be shopping for another lender that will offer 35 yrs or has everyone cut back on the longer amortizations?


Most are still offering 35. The odd one is even still doing a 40 year amoritization. Talk with your banker/broker about your 5 year plan and they`ll be able to help you to structure your financing to maximize your borrowing capacity.

 

[Thomas Beyer]

QUOTE (CLW @ Oct 21 2008, 03:54 PM) Should we be shopping for another lender that will offer 35 yrs or has everyone cut back on the longer amortizations?

ALWAYS always always shop for another lender through a mortgage broker !

Money is the pure commodity ! Like gasoline .. do you only get gas @ Shell or Husky only ?

 

[JimWhitelaw]

QUOTE (thomasbeyer2000 @ Oct 21 2008, 06:03 PM)
Money is the pure commodity ! Like gasoline .. do you only get gas @ Shell or Husky only ?




Up until this week, we didn't have a need to shop around as we were getting great product and service. It seemed prudent to leverage an existing business relationship vs spending time cultivating new ones when the outcome was favourable anyway. (A broker acquaintance we spoke to last week said he would have had to forgo his commission to get us a similiar deal as our last). Based on the responses so far, that's no longer the case so it looks like it's time to change tactics and invest that time looking for a better deal.



thx

 

[MikeMcCrae]

Please note weather you use a bank or a broker the information you get is only as good what the person giving you the information knows. When we go to the bank and ask a loans officer for some advise they can only tell us what they know. Case in point, my daughter in law just started working as a loans officer at CIBC. She is 22 years old and has absolutly no financial experience what so ever she did some training and now she is there ready and willing to help you. Is she able? Not a chance, and even her supervisor has given information that is just off the wall. As a professional investor it is important that you deal with professional advisors. Some of the banks "road reps" are very capable as well as some in house people but the onus is on you the investor to interview every one who is to be on your team and not just hire a banker or broker just because they are there.

My opinion right now on fixed rates is extreem caution. Locking in on a five year variable rate at prime + makes no sense to me. If rates go up you are contracted to that for the 5 years even if things change over the next several months. I still have some mortgages at prime less .9 and I like them but if prime was to jump to say 6% in years 2 or what ever you are paying prime + till the end of the term unless you lock in then at the prevailing rate at that time. Right now the one year fixed rate is very low (very low) . That may be a good way to go, but many mortgage brokers don`t like short terms because they don`t pay as well. Then on the other side of the spectrum the 7 year rate is not bad if you are looking for long term stability. I am usually a big fan of variable rates but right now I would take a pass on them.

I would appreciate other points of view.

 

[Nir]

Hi Mike,



I prefer a variable rate mortgage in ANY economic situation including today. tried to explained why here (post #8):



http://myreinspace.com/public_forums/Real_Estate_Discussion/62-7299-Interest_rates.html



Regards,

Neil

 

[GarthChapman]

QUOTE (investmart @ Oct 22 2008, 12:51 PM)
Hi Mike,



I prefer a variable rate mortgage in ANY economic situation including today. tried to explained why here (post #8):



http://myreinspace.com/public_forums/Real_Estate_Discussion/62-7299-Interest_rates.html



Regards,

Neil






I agree, but not when they are at prime plus anything. Your explanation makes good sense. I have been tracking variable rates vs fixed rate for 30 years and the variable rate mortgages have almost always been a better deal.



We have a couple of prime less 0.85% mortgages from properties that we sold, and we are now going to port them to properties with fixed rate mortgages at 5.9%. This means we will have to pay the prepayment penalties on the 2 fixed rate mortgages. Our payback on this strategy is 8 months, meaning we will be ahead, even after paying a $4,000 penalty on each mortgage, in the 9th month.

 

[GordM]

QUOTE (thomasbeyer2000 @ Sep 6 2008, 10:15 PM)
Banks are getting MUCH MUCH more difficult to deal with over the next year or more .. as they took a huge hit on the bad US sub-prime mortgage debt .. so they are looking to improve their cash position .. and a LOC means: a % of this LOC must be held in cash as a reserve by the bank under the Canadian Bank Act.



Expect banks to cut LOCs down WITHOUT WARNING - especially business LOCs and unsecured LOC. If you or your business needs the cash in the near future, I highly recommend that you draw on the LOC, pay the 4.75% interest and invest it at 3-5% .. an inconvenience and slight cost .. but a LOC could be cut back by any banks these days !!



Has this happened to you ?



Did you have a tougher time getting a mortgage with more paperwork than even 3 or 6 months ago ?



Share your positive or negative experiences in this post please !






Hi Thomas, So far I have not seen signs of tightening up. I have just renewed an MCAP mortgage on a triplex with no questions asked, and have just complete a re-fi with Scotiabank with minimal paperwork. Hard to believe that my mortgage rate is now 3.25% ... they're practically giving it away!! I had just done my personal residence mortgage 6 months ago with Scotiabank, so they used most of the original paperwork. I also have two businesses that use this branch, so my relationship with the bank manager is quite strong. In addition to mortgages, I have been offered more and larger PLCs, both with Scotiabank and TD, althought the TD offer was several months ago (Scotia was a few months ago too).



That's my take so far. Can't wait to see the reaction when I approach them for a larger, multi-unit apartment building (my first). This will be my true test!!



Gord Mackie (Hamilton, ON)

 

[terri]

QUOTE (GordM @ Oct 23 2008, 05:58 PM)
Hi Thomas, So far I have not seen signs of tightening up. I have just renewed an MCAP mortgage on a triplex with no questions asked, and have just complete a re-fi with Scotiabank with minimal paperwork. Hard to believe that my mortgage rate is now 3.25% ... they're practically giving it away!! I had just done my personal residence mortgage 6 months ago with Scotiabank, so they used most of the original paperwork. I also have two businesses that use this branch, so my relationship with the bank manager is quite strong. In addition to mortgages, I have been offered more and larger PLCs, both with Scotiabank and TD, althought the TD offer was several months ago (Scotia was a few months ago too).



That's my take so far. Can't wait to see the reaction when I approach them for a larger, multi-unit apartment building (my first). This will be my true test!!



Gord Mackie (Hamilton, ON)




Please let us know Gord how that works out because I'm seeing a huge shift in just the last few weeks. A refi that was a done deal fell through at the last minute, thank god it wasn't a new mortgage and we still have the existing mortgage in place. I think it took a little longer to hit the lenders here in Ontario than it did out west but there's a definite change from several months ago.



Terri

 

[Thomas Beyer]

QUOTE (GordM @ Oct 23 2008, 06:58 PM)
Hi Thomas, So far I have not seen signs of tightening up. I have just renewed an MCAP mortgage on a triplex with no questions asked, and have just complete a re-fi with Scotiabank with minimal paperwork. Hard to believe that my mortgage rate is now 3.25% ... they're practically giving it away!! I had just done my personal residence mortgage 6 months ago with Scotiabank, so they used most of the original paperwork. I also have two businesses that use this branch, so my relationship with the bank manager is quite strong. In addition to mortgages, I have been offered more and larger PLCs, both with Scotiabank and TD, althought the TD offer was several months ago (Scotia was a few months ago too).



That's my take so far. Can't wait to see the reaction when I approach them for a larger, multi-unit apartment building (my first). This will be my true test!!



Gord Mackie (Hamilton, ON)


yes, Scotiabank is still decent .. and I also just got a re-fi @ prime -0.6% .. because I applied 6 weeks ago .. if I did this today it would be prime + 1% .. a difference of 1.6% or 40% HIGHER !!



In commercial mortgages the spread has now widened to 400 basis points over the bond rate minimum (w/o CMHC) and a much lower loan-to-value, usually 50-55% .. much better still with CMHC in multi-res !

 

[PeterKinchMortgageTeam]

QUOTE (GordM @ Oct 23 2008, 05:58 PM)
Hi Thomas, So far I have not seen signs of tightening up. I have just renewed an MCAP mortgage on a triplex with no questions asked, and have just complete a re-fi with Scotiabank with minimal paperwork. Hard to believe that my mortgage rate is now 3.25% ... they're practically giving it away!! I had just done my personal residence mortgage 6 months ago with Scotiabank, so they used most of the original paperwork. I also have two businesses that use this branch, so my relationship with the bank manager is quite strong. In addition to mortgages, I have been offered more and larger PLCs, both with Scotiabank and TD, althought the TD offer was several months ago (Scotia was a few months ago too).



That's my take so far. Can't wait to see the reaction when I approach them for a larger, multi-unit apartment building (my first). This will be my true test!!



Gord Mackie (Hamilton, ON)






The lenders are still lending - for most that deal in revenue properties, their policies have changed little if at all. We are however, seeing them tightening up on conditions. Things like lease agreements, where a couple of months ago, an expired lease agreement might have been okay, it is no longer.



In fact, because many of the underwriting centres have slowed down signifigantly, we are seeing much quicker turnaround times and more effort on the underwriters part to make the deals work. It's really all about the packaging. A good broker or banker, experienced with revenue properties can package and underwrite a deal in a way that makes the bank say yes. An investor with a well put together and complete binder makes everyones job easier.

 

[derekcw]

Lenders are still lending but they are really ensuring that they keep their margins up.

I did some appraisals in preparation for some refinances the 1st week of September. I decided to just keep the refinances on the books and got all my pre-approvals done with 20% down, prime -0.6 open variable 3 year mortgages.

I decided to hold off until I got my next deal together.

It was 2nd week of October and theh deal for my next property was done - with money sitting on the table for me when the deal closed because the vendor was motivated by the scary market.

However when it came time to get the refiances all I could get was 20% down, prime, open variable mortgages. If was was to get the same deal done this week it would be 20% down, prime + 1 to 1.5 open variable for 3 years.

I was told since I`m primarly based in McMurray, and cashflow is still ridiculous, that I`m in good shape to get another property. So the money is still out there you just need to have the cashflow and the money down to support it. However, money is getting much more expensive!

Derek Wong
DCW Properties Group Ltd.

 

[GarthChapman]

QUOTE (derekcw @ Oct 24 2008, 04:36 PM) Lenders are still lending but they are really ensuring that they keep their margins up.

I was told since I`m primarly based in McMurray, and cashflow is still ridiculous, that I`m in good shape to get another property. So the money is still out there you just need to have the cashflow and the money down to support it. However, money is getting much more expensive!

Derek Wong
DCW Properties Group Ltd.

You might consider taking one-year fixed rate mortgages. I was just quoted 4.35% by Scotia for this product and they are holding the rate for me for 3 months. I think that should carry until the variable rate mortgages once again go below prime. Competition should do that for us soon enough.

 

[Thomas Beyer]

QUOTE (GarthChapman @ Oct 24 2008, 06:01 PM)
You might consider taking one-year fixed rate mortgages. I was just quoted 4.35% by Scotia for this product and they are holding the rate for me for 3 months. I think that should carry until the variable rate mortgages once again go below prime. Competition should do that for us soon enough.




brilliant suggestion !



I also learned yesterday that some lenders do this with CMHC for multi-res i.e. 1, 2 or 3 year terms !



There is life beyond the 5 year mortgage in Canada !!

 

[Yev]

Hi Thomas,

Would you mind letting us know which lenders are willing to offer `short` CMHC terms for multi-res?

Thanks,

Yevgeni

 

[Thomas Beyer]

QUOTE (Yev @ Oct 25 2008, 10:45 AM)
Hi Thomas,



Would you mind letting us know which lenders are willing to offer 'short' CMHC terms for multi-res?



Thanks,



Yevgeni


this one is 1st National .. but only over $6M !



ask a commercial mortgage broker ! it changes daily these days !



some banks have X $s today, .. and then 0 tomorrow .. followed by Z $s the next day !!!

 

[Yev]

Thanks Thomas

Yevgeni