Interest only payments in Canada ?

Question

Hello,

I am curious if Interest only payment lenders exist in Canada, more primarily in Ontario. I am not referring to hard money lender who charge 8%+ but some what comparable in 3-5% range. Not that I need it, but still look at options.

Roy N. · Answer

Haseeb:

That depends on the purpose of your financing, how long it will be and the meat on the bones of your deal.

Historically, rates on mortgage lending in Canada have been in the 6 - 9% range, what we've witnessed the past 8-10 years is an anomoly.  The last time mortgage rates where in this low was during the 1930s.  Unless we are headed for stagnation, there is no reason not to expect rates to return to that range.  When underwriting, I model a property at rates as high as 7% to determine whether a deal can hold its own.

Haseeb Awan · Answer

@Roy N. Thanks this information has been useful :)

Haseeb Awan · Answer

@Roy N. Anything above 4-5% isn't acceptable when you are leveraging IMHO.

Roy N. · Answer

@Haseeb Awan

About the only way you will get an interest only loan from a conventional lender would be via a secured line of credit (LoC).    In the commercial space you are going to pay 3.75 - 6% on that money ... if you can find a lender who will still offer a secure line of credit on a residential property, you could see rates as low as prime or prime +2.

Private lenders - either via a vendor carry or third-party - are your most probably source of interest only notes and you may pay up to 8 - 10% for the privilege.

Hard money will normally come-in higher again.