I am Dalia, founder of Streetwise Mortgages. As mortgage qualifications have tightened for residential properties between 1 and 4 units due to the rising interest rates, you may find it harder to switch lenders for better rates at renewals, qualify for the full loan amount on a purchase or a refinance, or have to switch from cheaper lenders to more expensive lenders.
Under regular residential mortgage qualifications, the lenders typically look at your personal income, any rental income earned along with all debts to approve the file. If the numbers do not fit with the lender’s (Gross Debt and Total Debt guidelines), they will typically cut down the loan amount.
I am about to share with you some new programs on the street that can help you overcome the approval hurdles as the lenders can go above their typical Gross and Total debt guidelines using these programs.
Here are the options:
1. Net-worth and Wealth-based Programs: Under these programs, the lenders would take into consideration any non-real estate assets that you own including registered, and non-registered investments and of course cash. Some lenders will lend dollar for dollar against this net worth above what you qualify for under the regular rules and some lenders will take a percentage and add it to your income.
2. Extended-ratios Programs: Under these programs, the lender would approve your file if the ratios are high up to a certain amount and add a rate premium to the interest rate.
3. Self-employed: Some banks offer programs that allow adding a percentage of your corporate net income after taxes or professional income from the corporation to your personal income to help you qualify.
4. Commercial Financing for Residential Properties: Under a commercial option, we can look at your residential portfolio as a business and see if it can support the requested loan amount. There is also a CMHC-insured option for properties that are adjacent to each other that can form a combined number of legal units of 5 or more.
I would suggest using this as a last resort after exhausting your residential options because this option tends to cost more, amortizations tend to be shorter than 30 years AM unless a CMHC option is considered, and options are limited when the loan amount is below $1000,000 and blanket mortgages are often required, which ties properties at the hip and limit your flexibility.
These new solutions are making it possible for investors to continue to scale, consolidate debts and switch lenders to save on renewals. They are also available for both primary residences and rentals.
If you feel that you have hit a wall with financing, I invite you to explore these options which would unlock new possibilities for you. Visit us at Streetwise Mortgages or better yet, reach out to my team at [email protected].