conventional financing ccf day 3
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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