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Ensure your residential property meets the lender’s eligibility criteria before applying for a loan. Discover the key factors that lenders consider and maximize your chances of approval. Read now!
One of the most overlooked areas of mortgage qualification is the analysis of the subject property itself. Most brokers and borrowers spend much of their efforts and focus on fulfilling their income, credit and down payment requirements (and rightfully so), but every so often an issue with the property arises that trumps the entire qualification leaving the mortgage approval dangling by a thread. To avoid this happening to you, be aware of the following key property guidelines when it comes to mortgage qualification.
Key Property Requirements:
property must be located in Canada
any property zoning other than residential will almost always result in an automatic decline. If you are purchasing a property with complimentary land title designations, advise your broker ahead of placing an offer to see what, if any, financing options are available. This is not to say that there will be no options, but if there are, you can expect an entirely different set of requirements (i.e. substantial down payment increase, higher interest rate, etc)
residential properties are considered mortgageable up to a fourplex. After this, the property is considered multi-family and requires commercial financing. For most mortgage brokers, commercial financing is outside their scope of work and the application is often referred to a broker that specializes in commercial mortgages.
Eligible Property Types: detached, semi-detached, row townhouse and apartment/condo (for other property types inquire with your broker well ahead of time to explore the market place for niche lenders that may specialize in certain property types i.e. mobile homes)
Eligible Property Tenure / Land Title designations: freehold, condominium/strata, and select leaseholds (see next point)
Leasehold Requirements: mostly Government and on-reserve leaseholds are acceptable subject to the following conditions: (i) lease term must be at least 5 years longer than the mortgage amortization (ii) the lease must contain the buy-out price to convert to freehold (iii) lease payment must be fixed for the term (iv) leasehold interest must be assignable to mortgagee/insurer in the event of default (v) lease must be convertible to freehold, in the event of default and legal action
Acreage Properties: the lending value will be lesser of the purchase price or the appraised value of the dwelling and 15 acres. Properties greater than 15 acres are reviewed on an exception basis only
for properties with ‘outbuildings’ the value attributed to the outbuilding cannot exceed 20% of the appraised value of the property (vehicle storage building, hobby space, guest house)
properties that have a commercial component are not eligible under residential mortgage financing (any outbuilding that generates an income)
properties with existing or previous environmental issues/concerns may be required to obtain an Environmental Site Assessment to confirm the concern/issue has been fully remediated
former grow operations are considered on a case-by-case basis with select lenders provided that they have been fully remediated as per the municipal requirements
age restricted condos (considered on a case-by-case basis subject to lender and/or insurer analysis of overall marketability)
and finally, post-tension cable construction. This is a method of constructing concrete slabs on condos and apartment buildings and basically includes various structural and maintenance risks that some lenders or insurers are not comfortable with. Don’t expect every lender and insurer to be accommodating of these properties, but there are enough in the marketplace that are accepting them
Wondering if your property checks off all the boxes? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.
Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!
Does your residential property fulfill the lender’s eligibility criteria?
(July 15, 2023)
Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!
Ensure your residential property meets the lender’s eligibility criteria before applying for a loan. Discover the key factors that lenders consider and maximize your chances of approval. Read now!
One of the most overlooked areas of mortgage qualification is the analysis of the subject property itself. Most brokers and borrowers spend much of their efforts and focus on fulfilling their income, credit and down payment requirements (and rightfully so), but every so often an issue with the property arises that trumps the entire qualification leaving the mortgage approval dangling by a thread. To avoid this happening to you, be aware of the following key property guidelines when it comes to mortgage qualification.
Key Property Requirements:
property must be located in Canada
any property zoning other than residential will almost always result in an automatic decline. If you are purchasing a property with complimentary land title designations, advise your broker ahead of placing an offer to see what, if any, financing options are available. This is not to say that there will be no options, but if there are, you can expect an entirely different set of requirements (i.e. substantial down payment increase, higher interest rate, etc)
residential properties are considered mortgageable up to a fourplex. After this, the property is considered multi-family and requires commercial financing. For most mortgage brokers, commercial financing is outside their scope of work and the application is often referred to a broker that specializes in commercial mortgages.
Eligible Property Types: detached, semi-detached, row townhouse and apartment/condo (for other property types inquire with your broker well ahead of time to explore the market place for niche lenders that may specialize in certain property types i.e. mobile homes)
Eligible Property Tenure / Land Title designations: freehold, condominium/strata, and select leaseholds (see next point)
Leasehold Requirements: mostly Government and on-reserve leaseholds are acceptable subject to the following conditions: (i) lease term must be at least 5 years longer than the mortgage amortization (ii) the lease must contain the buy-out price to convert to freehold (iii) lease payment must be fixed for the term (iv) leasehold interest must be assignable to mortgagee/insurer in the event of default (v) lease must be convertible to freehold, in the event of default and legal action
Acreage Properties: the lending value will be lesser of the purchase price or the appraised value of the dwelling and 15 acres. Properties greater than 15 acres are reviewed on an exception basis only
for properties with ‘outbuildings’ the value attributed to the outbuilding cannot exceed 20% of the appraised value of the property (vehicle storage building, hobby space, guest house)
properties that have a commercial component are not eligible under residential mortgage financing (any outbuilding that generates an income)
properties with existing or previous environmental issues/concerns may be required to obtain an Environmental Site Assessment to confirm the concern/issue has been fully remediated
former grow operations are considered on a case-by-case basis with select lenders provided that they have been fully remediated as per the municipal requirements
age restricted condos (considered on a case-by-case basis subject to lender and/or insurer analysis of overall marketability)
and finally, post-tension cable construction. This is a method of constructing concrete slabs on condos and apartment buildings and basically includes various structural and maintenance risks that some lenders or insurers are not comfortable with. Don’t expect every lender and insurer to be accommodating of these properties, but there are enough in the marketplace that are accepting them
Wondering if your property checks off all the boxes? Call or text Marko Gelo right now at 604-800-9593, or Click Here to schedule a free, no-obligation phone call with Marko.
Don’t want to miss out on the next blog post? Click Here to have future issues emailed directly to your inbox!
Home Financing Solutions is a franchise of The Mortgage Centre. Offices in Calgary and Vancouver. One Application, One Credit Check and access to Canada's top lenders.
