More mortgages in canada... who will lend the most residential mo

13 Replies

@Evan McLeish

It changes from time to time depending on a lender's portfolio mix and their appetite for a certain kind of financing.   As an example, this is the first I head of RBC allowing seven residential mortgages ... for years they bowed out at five (not five from them ... five in total).   Conversely, they will/would fund a six unit building under a residential mortgage, which meant you needed to be strategic.

Similarly, CIBC will/would fund a 5-unit property as residential and would allow up to ten mortgages in total ... though the liquidity requirements as you approach ten are a little silly.

TD and Scotiabank have shifted between five and seven mortgages since we've been dealing with them.

It's been our experience that, regardless the lender, things get more challenging after seven mortgages and for ten residential mortgages we were advised of minimum liquidity requirements ranging from 200K to over 500K ... kind of silly to be asked to hold 250K liquid when you are seeking a financing of 150K :-|

once I hit 5 mortgages I was having such a hard time with the big banks. Lately I’ve been working with credit unions, they’ve been way more willing to work with me and their policies aren’t as stringent. 

@Matt Belzile

Credit unions are great - things are typically handled locally - the way banks use to be- so will have a better handle on the local market and may even understand your project.    The only downside is the money may be a little more expensive as credit unions frequently finance all rental properties as commercial deals.

I had a call with Bank of Montreal last week asking questions about loaning for my first.

One question I asked was “what if I want to buy 100 units, do you have limits? I know in the US it’s a bit hard after 10.”

The guy said “it’s fine, we evaluate based on income. But we only use 50% of your property gross incomes to evaluate. If it qualifies, you could theoretically keep going”.

Maybe a different mortgage rep would say something different though.

Roy N , yes I have heard of a fellow investor going higher with cibc with liquidity.  It does get ridiculous though. 

Matt which Credit unions are you working with? I called spruce and integris in my local branches and spruce said 4 and integris said 5 like the big banks... of course this was just a simple phone call they didnt look at my portfolio at all

That's interesting about BMO I'll have to give them a call. Watch out for misinformation though when I first called spruce some associate said unlimited and I asked for clarification and found out actually only 4

Most places use 50 percent rental income cause that's a easy calculation to find your net income after expenses... but some banks dont as I was told by my broker , do good question to ask

@Evan McLeish , @Anthony Therrien-Bernard

As with the variance of appetite of lenders for the maximum number of {residential} mortgages you hold, there is a range in the portion of rental income lenders will accredit to you.  However, as alluded in your posts, many follow the CMHC guideline of a 50% inclusion rate for rental income (or, up to 100% in an owner-occupied property - i.e. duplex or secondary suite), even when mortgage insurance is not involved.

The appetite will also vary depending on economic conditions, the lenders portfolio content and internal lender policies (which sometimes seem arbitrary).  We have had lenders allow a 70% inclusion on rental income.  Conversely, while seeking financing on a triplex, we had a lender count the financing of two five and six unit buildings into our debt load (they were financed as residential via RBC and CIBC), but disallow the revenue from those properties (under the guise they were commercial).

Always best to have a frank discussion with your lenders and brokers before you arrive at the point of financing.

Careful guys, these rules only apply to "residential mortgages". If you want to build a big real estate portfolio, you'll want to deal with commercial mortgages since there are not limits. Financing is based on the profitability of the building itself, and not on personal debt ratios which makes it easier to finance. 

Originally posted by @Guillaume D. :

Careful guys, these rules only apply to "residential mortgages". If you want to build a big real estate portfolio, you'll want to deal with commercial mortgages since there are not limits. Financing is based on the profitability of the building itself, and not on personal debt ratios which makes it easier to finance. 

 Guillaume:

The above discussion was {implicitly} about residential properties ... 

I would counter that while commercial financing is different it is not really any easier.  

There is also the factor that many commercial lenders will not entertain residential properties (unless you are looking at a blanket or portfolio product) and a large number won't touch small deals (anything less than 1 to 2 million).  Credit unions are an obvious exception as they typically finance any rental property as commercial.

That said, I too prefer commercial financing as it is more in-line with how one would finance any capital intense business.

@Roy N. Then I guess it depends on where you are in Canada, because we don't have credit unions here in Quebec. And yes, you can typically finance smaller deals on the commercial side of the banks as I've done it many times. You can even finance a single-family house through commercial financing. I was just saying that if investors don't want to be limited by a maximum number of mortgages on their record, they simply need to consider commercial mortgages. 

Originally posted by @Guillaume D. :

@Roy N. Then I guess it depends on where you are in Canada, because we don't have credit unions here in Quebec. And yes, you can typically finance smaller deals on the commercial side of the banks as I've done it many times. You can even finance a single-family house through commercial financing. I was just saying that if investors don't want to be limited by a maximum number of mortgages on their record, they simply need to consider commercial mortgages. 

Guillaume:

When I lived sur la côte sud de MTL in the 80s, Québec had the largest credit union in the country - if not the world - in Alphonse Dejardin's Caisse-populaire.  These days Dejardins has a growing presence outside of Québec through the absorption of smaller networks of credit unions)

Perhaps it is a regulation or business difference in Québec (when I lived there, I was not investing in real estate).    In our experience, the commercial lending practices of the Big-5 (Schedule 1) banks have had no appetite for deals under $1M.

While the point about commercial lending being based upon the business and not the individual, may be attractive for small properties (and essential for larger ones), commercial lending is more expensive (originating (legal, administrative) costs, lending rates (unless CHMC insured)), than residential.  

While credit unions, and perhaps other {second tier?} lenders do finance any size rental property as commercial, the additional service burden placed on a single-family - or even a duplex, triplex or quadruplex - could take much of the bloom from the rose.

@Roy N. Ok you're right about the credit unions then. I just didn't know it was the name being used to describe an entity like Caisse Desjardins which is known as a Cooperative here in Quebec. Bottom line is that it's all a question of numbers. Yes, interest rates tend to be higher on commercial loans and yes there are some additional fees, but if it helps people get over the hump of the "maximum number of residential mortgages", then I'm just saying it's an option that needs to be considered. If going commercial takes "much of the bloom from the rose" as you say, it might be because people are overpaying for their purchases ;). Thanks for the response! Just trying to help as you are.