Canadian BRRRR still available?

Question

I have some cash that I'm interested to invest in real estate here in Ontario Canada and last week I went to a mortgage broker to discuss potential mortgage + improvement deals that I can qualify for so I can start looking. She informed me that banks don't do the 3 months refinancing deals anymore!

Is that true? If not what are the lending options for a mortgage + improvement in Canada?

Thanks so much

Is that true? If not what are the lending options for a mortgage + improvement in Canada?

Thanks so much

Brandon P. · Answer

Most banks will do a purchase plus improvements mortgage if you obtain a high ratio insured mortgage through genworth or CMHC. I believe the max they will loan for renovations is a maximum of 20% of the purchase price. I included a link for more information about genworth's program.

This is the best option if you are wanting to rent the property out afterwards because when you apply for another mortgage on a different property, the next lender will calculate your debt service ratios including 100% of the rental income, usually making it just as easy to qualify as when you purchase your first property.

You can BRRRR with a conventional mortgage(20% down payment) as well, there are lenders which will do 6 month or 1 year terms, then you could refinance at the end of the term. It is a bit more difficult to scale up at first with conventional mortgages because if you go to purchase additional properties later, the lender will only include 50% of the rental income when they calculate your debt service ratios.

I recommend finding a mortgage broker who has experience dealing with rentals(not all of them do) and also speak with a mortgage advisor at a local credit union. The credit unions in Canada are subject to provincial legislation, they operate under a separate set of rules than the national banks do, so its worth exploring your options with them.

http://genworth.ca/en/products...

Ryan Kirk · Answer

I wouldn't recommend a purchase + improvements loan for the following reasons:

1.  Conservative after-reno valuation.  The banks take a look at your basic renovation plans and guesstimate what your home will be worth afterwards.  They are conservative, because they don't know if you're going to do a good job with the renos, or what types of finishings you will include.  This means the amount of equity you can withdraw is reduced and you end up leaving a lot of money locked in the property.

2.  Time constraints.  You mentioned 3 months, my experience was 4 months.  But that can add pressure to an already challenging time overseeing the reno & looking for quality tenants.  You don't want to rush either in order to meet the bank's timeline.

I would get a 1-year mortgage and shop around for flexible terms so you can refinance after 5-6 months.  This ensures the renovation is 100% complete, the units filled with quality tenants, and you can benefit from any market appreciation in that time as well.

Account Closed · Answer

@Ghassan Alsayyed

It’s doable. TD will be friendly to this in my experience. They’ll also do a purchase plus improvements if you want.

Ghassan Alsayyed · Answer

Thank you! Do you have any operations in Ontario?

Julie Toh · Answer

@Ghassan Alsayyed Welcome to BP. I hope you find the resources you need to move forward. In response to your post...I've arranged an equity take out mortgage for a client who did a BRRRR after 6 weeks. Whether it's 6, 10 or 16 weeks, your application needs be well packaged to be successful. A key thing to note is that lenders have liquidity and default concerns these days. Refinancing a rental is not a priority for many lenders.

Ghassan Alsayyed · Answer

This is very helpful. Thank you!

Warren Lee · Answer

All the deals I have done I was able to BRRR within 6 months. Never tried the 3 months though. I'm going to try for 1 month on my next deal!

CO Yilmaz · Answer

My memory might be a bit fuzzy - you could do a construction loan on a new build or on a major renovation.

I know Meridian and BMO will offer it and they will pay you based on the phases that are completed.

Theyll give the loan once the city gives you the ok for it and if you have the plans ready. But it doesnt hurt to ask them so you can get prepped.

Or you can go to company like domus financial corp

Ghassan Alsayyed · Answer

Yes the amount of time between the first mortgage and the refinance after renovation.

Isn't construction loan for new builds?

Canadian BRRRR still available?

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