By : Radu Arvatescu
Most properties can be easily categorized and assigned to mortgage products. Single residential dwellings can be purchased with a standard home mortgage. Commercial properties like retail stores and offices can be purchased with commercial mortgages. Industrial properties are brought with industrial mortgages.
However, what happens when a piece of real estate can’t be easily categorized? Does it fall into the closest possible category?
In the world of real estate and mortgage lending, you’ll often be surprised by certain rules and products that you haven’t seen before. Special purpose mortgages Ontario is probably an example.
If you find yourself considering an investment in a property that is entirely unique, you might be in need of a special purpose mortgage. These mortgages cover commercial real estates like golf courses, theatres, gas stations, sports stadiums, amusement parks, and bowling alleys.
Application and processing are mostly the same as other commercial mortgages, but you may find yourself needing additional supporting documentation to secure finance.
Here’s what you should know before you look for options on special-purpose mortgages Ontario.
Special Purpose Mortgages Ontario Require Additional Assessment
As with almost everything in the mortgage market, the key difference in a special purpose mortgage comes down to risk assessment.
Assessing a standard office building and its commercial viability is relatively simple for a lender. A block of multi-family homes can easily be evaluated through data like occupancy, income, and market value.
With a special use property, loan appraisers need to look at a variety of factors that aren’t typical to other investments. Some of these are:
- How revenue is derived: Most special use properties don’t have a single source of revenue, so gauging income can be difficult. An appraiser will need to determine which revenue streams can be viably considered under projected income. For example, many movie theatres make most of their income from concessions, rather than ticket prices.
- Whether income is seasonal or regular: Hotels, amusement parks, and sports stadiums are all excellent examples of real estate investments based around seasonal revenue peaks and troughs. This can make it more complicated to perform an accurate appraisal.
- Heightened competition in the industry: This one really matters. The popularity of an amusement park could rise, and fall based on consumer trends and competing for entertainment sources. It’s hard to predict amusement park revenue from year to year without looking at extensive historical financial data and market trends.
All of this combines to make a business proposal absolutely critical. In many cases, you will need to ‘sell’ a lender on your concept and your vision for the future. That vision will need to be backed by solid financial data.
Special Purpose Mortgages May Attract Higher Rates
Like it or not, if you decide to invest in a special use property, you will likely see above-average rates for special purpose mortgages Ontario. As a borrower, you will have fewer options on the market. A relatively small number of lenders will be willing to extend finance when compared to a standard commercial property.
Thankfully, there’s still a way to find highly competitive rates. Working with a broker is important no matter the mortgage type. With special-purpose mortgages Ontario, a broker becomes essential.
Your broker will be able to look at your application and tell you how to improve it to make it more attractive to lenders. They will then use their vast contact network to collect all available loan offers with the lowest possible rates.
The total cost of lending is likely to be more than a regular commercial mortgage, but a broker will lessen the impact that comes from completely unique property investments.
If you have confidence in your business plan and vision, working with a broker will make your next real estate purchase a reality.
Lowest Residential Mortgage Rates in Canada*
|Term||OUR RATE||TD Bank Rate|
|3 Year Fixed/ 25 yrs||5.99%||6.51%|
|3 Year Variable/ 25 yrs||6.20% Promo||6.70%|
|4 Year Fixed/25 yrs||5.54% Promo||6.29%|
|5 Year Fixed/ 25 yrs||5.54% Promo||6.14%|
|5 Year Variable/ 25 yrs||6.20% Promo||6.90%|
|5 Year Fixed/ 30 yrs||6.05% Promo||6.24%|
|5 Year Variable/30 yr||6.70%||7.05%|
|4 Year Fixed/30yr||6.34% Promo||6.39%|
|3 Year Fixed/30yr||6.24% Promo||6.61%|
|**NEW RENTAL 5 Year Fixed /30yr||6.15% Promo||6.29%|
|** NEW RENTAL 3 Year Fixed /30yr||6.34% Promo||6.66%|
Updated: Aug 23 , 2023
* Current promotion rates may provide an additional 0.05% discount or may be anytime discontinued at the Lender discretion . Rates may vary between geographic regions and the posted rates on this website may not be available in your area.TD Bank rate used for comparable are the rate listed by TD Canada Bank in the Broker Chanel Portal at the date above. Please contact our MCI office for more details and current promotions.
LOWEST REGULAR RATES IN CANADA* * Current promotion rates may provide an additional 0.10% discount. Rates may vary between geographic regions and the posted rates on this website may not be available in your area. Please contact our MCI office for more details and current promotions.