While there are many different types of mixed use properties on the market, the most common form out there is a real estate property where the building houses a retail store and one or more apartment buildings on one or more floors of the complex.
And even though there is a very large number of these types of properties in existence, the ability to secure mortgage financing for purchase, refinancing, or construction can be very difficult to come by at times, depending on the location of the property, its condition and layout, and the financial and credit profile of the applicant(s).
The average loan to value secured for a mixed use mortgage is 65%.
And while higher loan to value amounts can be secured up to the 75% loan to value level, there are more properties being financed closer to 50% of the fair market value of the property.
Because there is no mortgage insurance programs available for mixed use properties, the amount of equity required in most cases is significant and can present a real barrier for those looking to acquire mixed use properties for self use, investment properties, or both.
Both banks and private mortgage lenders will consider and approve applications for a mixed use mortgage.
The challenge with securing mortgage financing from the major banks is that most lenders in this category will only consider mortgage requests above $250,000.
Secondary banks and Credit Unions will consider smaller amounts for mixed use property financing, but that may also only be provided at a loan to value range of 50% to 65%.
Especially within a regional area where other institutional lenders do not have much of a presence, Credit Unions can provide be the best option for securing a mixed use property mortgage. Because of each Credit Union’s localized focus, they tend to be more in tuned with the local market and are better position to assess and manage the risk associated with these types of mortgages.
Trust companies also finance Toronto mixed use properties, but do so on a fairly small and selective scale. The regulatory requirements most Trust companies follow can have significant restriction with respect to mixed use properties including the amount of their overall portfolio that can be used for this purpose.
Private mortgage lenders are also key financing sources for Toronto mixed use properties, providing mortgages ranging mostly from one to three years in duration.
Even though a private mortgage is likely going to come at a higher interest rate than a bank or institutional lender, for certain property types in certain locations, a private mortgage may be the only available option.
And because most private mortgages only require interest only payments, the cash flow requirements for debt servicing can be very similar to what a bank or institutional lender would require for monthly interest AND principal payments.
Private mortgages can also be preferred when time is of the essence.
The application process for mixed use properties administered by institutional lenders can be long and drawn out affairs that are very difficult to predict.
When time is short and financing required in order to save a deal or retain a property, a private mortgage option can be the best and fastest solution.
Sources of financing for Toronto mixed use property mortgages can also continually change their lending criteria to better manage changes in the market and the risk level in their overall portfolios.
Needless to say, the process for locating and securing a mixed use mortgage can be daunting at times.
If you need financing for a mixed use property, one of the best approaches to consider is to work with an experienced group of mortgage professionals who can help you quickly zero in on the most relevant sources of financing for your situation at a given point of time and help you get a mixed use mortgage commitment secured and disbursed in the time you have to work with.