Conventional Financing and Leverage

Canadian Imperial Bank of Commerce: CIBC

Toronto Dominion Bank: TD

Bank of Nova Scotia: Scotiabank

Bank of Montreal: BMO

Royal Bank of Canada: RBC

Conventional Financing The “Big Five”

470 Lending Institutions in

Canada

Conventional Financing In Canada there are:

24 Schedule 1 Banks   22 Schedule 2 Banks

 424 credit unions  

Traditional lending by financial institutions:

①  Mortgage

②  Secured LOC

③  Unsecured LOC

④  Secured Loan

⑤  Unsecured Loan

Conventional Financing Most common

Conventional Financing Qualify the Buyer and Property

How Financial Institutions qualify buyers

Ø Measured in Loan-To-Value (LTV)

Ø  >80% LTV is considered High-Ratio

Ø High ratio lending is required by law to be insured

Ø  Proof of Down Payment

Ø Gifts can be given as history

Down Payment

LTV Amortization Period (years)

25 30 35

80.01% 1.75% 1.95% 2.15%

85.01% 2.00% 2.20% 2.40%

90.01% 2.75% 2.95% 3.15%

95.01% 3.1% 3.30% 3.50%

CMHC

Ø  Income & Expenses

Ø  Employment History

Ø  Job Security

Employment and Affordability

Conventional Financing Employment Status

GDS The percentage of gross annual income required to cover payments associated with housing. GDS= Annual Mortgage Payment + Property Tax Gross Family Income

Conventional Financing Employment Status

GDS= Annual Mortgage Payment + Property Tax Gross Family Income Example Jack and Jill, two law students, have a monthly mortgage payment of $1,000 (annual payment of $12,000), property taxes of $3,000 and a gross family income of $45,000. This would give a GDS of 33 %. Based on the benchmark of 30%, Jack and Jill appear to be carrying an unacceptable amount of debt.

Conventional Financing Employment Status

TDS

The percentage of gross annual income required to cover payments associated with housing and all other debts and obligations

TDS= Annual Mortgage Payment + Property Tax + Debt payments Gross Family Income

Conventional Financing Employment Status

TDS= Annual Mortgage Payment + Property Tax + Debt payments Gross Family Income Example For example, Jack and Jill, two law students, have a monthly mortgage payment of $1,000 (annual payment of $12,000), property taxes of $3,000, car payments totaling $1,000 and a gross family income of $45,000. This would give a TDS of around 36%. Based on the benchmark of 40%, Jack and Jill appear to be carrying an acceptable amount of debt.

“It is the measure of the fiscal responsibility a person displays in dealing with their creditors.” Factors affecting your personal credit: 5. Types of Credit 4. Number of Inquiries 3. Length of Credit History 2. Use of Available Credit 1.  Payment History

Personal Credit

FICO Score

300-900

Equifax www.equifax.com

Transunion www.transunion.com

Note: The actual formulas used to calculate credit scores are the property of private companies and are not available to the public

Credit Agencies

4. Use listed on listing 3. History 2. Condition 1. Comparable value

How FI’s Qualify The Property

Structure 3

65% HELOC

15% Mortgage

20% Equity

Structure 2

95% Mortgage

5% Equity

Structure 1

80% Mortgage

20% Equity

Common Financing Structures

Downpayment

Ø Closed/Open

Ø Variable/Fixed

Ø Amortization

Price versus Terms

Scotiabank: STEP Mortgage

CIBC: Home Power Plan

BMO: Readyline

RBC: Homeline

TD: Currently not available

Instant Access to Principle Recapture

Scotiabank: Purchase Plus Improvements

CIBC: Purchase Plus Improvements

BMO: Currently not available

RBC: Currently not available

TD: Currently not available

Flip to Yourself

Flip To Yourself

Cash Back Mortgage

Critical Approach

Talk to the right experts

for INVESTORS!

Financing US Properties

BMO/Harris Bank: Canadian Gateway Program

TD: Launched new program November 2013

Ø  Provincially Regulated

Ø  Can provide 80% LTV HELOC

Ø  Membership structure

Credit Unions