APARTMENT BUILDING FINANCING

If your mortgage is coming due for renewal or you wish to apply for a new mortgage on a purchase, allow plenty of time for the approval process of the lender. The lender may need a new appraisal which can take as long as one month to complete, which when added to the approval time needed by the loan officer and head office can be lengthy

You must be organized and be prepared to provide information as outlined below; but may vary according to your own circumstances;

• Financial Statements of your company.

• Three years statements of income and expenses for the building, if applicable.

• Complete personal net worth statement.

• Current rent roll for the building.

• Any relevant Tribunal documentation.

• Current appraisal., if you have one in your possession.

• Survey or site plan.

• Tax/Assessment information.

• Environmental, Phase 1 Study and Structural Report may be required.

There is a good appetite for apartment building financing at this time, however a word of caution, some lenders are unrealistic with their demands, and then there are lenders with more experienced and more reasonable requirements. Select your lender carefully, with this in mind. Also be aware that buildings with existing C.M.H.C. insurance may not have the option of being increased. For those who are buying a building with an existing mortgage may not have mortgage discharge as an option, or the discharge is penalty is such that a vendor cannot afford to complete a sale if you ask for discharge.

There are certain criteria that are requested with each application, with variation to the requirements depending on circumstances related to the application. Typical standards/expectations would be;

• Debt service ratio of 1.2 to 1.4.

• Vacancy and bad debt of possibly 3% to 5%, often based on the most recent C.M.H.C studies.

• Maintenance costs of approximately $500.00 per unit per month, depending on the age & condition of the property.

• Capitalization rates of as low as 7% to a high of 12% or more.

• Loan to value ratio of 60% to 75% without C.M.H.C. insurance, higher if insured.

• Interest rates at the time of writing of this article are as low as 4.15% to a high of 8%, dependant on the risk and size of loan.