It wasn’t all that long ago that you could get a multi unit mortgage on a residential property with no more than 4 separate living units for at or near 100% of the property value through an insured mortgage.
Today, whether you’re talking about insured mortgage or uninsured residential home mortgage programs, multi unit residential financing is pretty much capped out at 80% of the property value.
For investors with some cash that are looking to acquire some of these properties, there will be some good opportunities to find in the market due to the fact that potential buyers will be fewer due to the lower level of leverage that can be obtained.
In addition to the lower leverage provided by lenders for a multi unit residential mortgage, lenders have also tightened up on the repayment requirements. Instead of being able to apply up yo 80% of the collected rents towards the mortgage repayment, the amount considered for debt service has been reduced to 50% by most lenders.
These changes in rules can also make it difficult to change mortgage providers if your current mortgage provider is not interested in renewing the mortgage or if you’re just looking for better rates and/or terms. The difficulty lies in not having sufficient equity in the property to cover off the 20% of property value that mortgage lenders are no longer prepared to finance.
In some circumstances, private mortgage lenders may be prepared to go higher than 80% or provide a second mortgage, but that would be assessed on a case by case, lender by lender basis.
Vendor financing of part of the 20% of the property value that can’t be financed by an institutional mortgage lender may be workable provided that their repayment terms fit into the cash flow available for debt service.
Because there can be variations in what can be secured for a given property from one lender to another, the keys to being successful with Toronto multi unit mortgage financing is to 1) start the process early, and 2) work with an experienced mortgage broker.
Starting the process early would mean giving yourself at least 30 days to arrange financing on either a mortgage refinance or a property purchase. Less time will mean less options or no options.
Working with a mortgage broker that has successfully placed multi unit mortgages will allow you to quickly zero in on the best available programs that are the most relevant to your situation and will assist you in properly packaging your application to increase the probability of getting a lending decision in your favor.