investment property financing
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How do you make the Banks say “YES”TRANSCRIPT
presents
INVESTMENT PROPERTY FINANCINGMAKE THE BANKS SAY “YES”!
A little about Geoff Lee…
√ Co founder and Director of the Imani Orphan Care Foundation● www.imaniorphancare.com
√ Over 22 years of real estate experience and investment
√ Member of…● Better Business Bureau● Chamber of Commerce● Mortgage Brokers Association of British
Columbia● Canadian Association of Accredited Mortgage
Professionals
√ Mortgage educator/key note speaker for… ● Wealthy Investment Network ● Business Network International
√ Regularly sourced for mortgage insights by the … ● Vancouver Sun ● Mortgage Broker News
√ Ranked amongst the top 3% mortgage brokers in Canada by CMP magazine
√ Finalist in 2014 CMP Canadian Mortgage Awards for Best Customer Service from an independent office
How do you make the Banks say “YES”?
Debt Servicing
It is all about Debt Servicing
How do you make the Banks say “YES”?
Debt Servicing
What is Debt Servicing?• Income Earned versus Debt Owing
• Gross Debt Servicing – GDS
• Total Debt Servicing – TDS
• Lender’s guidelines
What affects Debt Servicing?
Income earnedIncome qualified – “salaried”
• Rate per hour x weekly hours worked x 2 x payroll periods
• Two year average of Notices of Assessment (NOAs)
What affects Debt Servicing?
Income earnedBusiness for Self – “self employed”
• Two year NOA average with gross up
• Two year NOA average adding back expenses
• Financial Statements
• T1 Generals – “Statement of Business Activities”
What affects Debt Servicing?
Income earnedBusiness for Self – “self employed”
• Stated Income
• What is stated income?
• What do Lenders look for?
• Amount of time self employed
• Credit score
• Repayment history
• Amount of debt owing
• Reasonability
What affects Debt Servicing?
Income earnedOther income Lenders will consider…
• Universal Tax Benefit• 6 years old
• Canada Child Tax Credit• 18 years old
• Parental/Spousal Support• Cannot be more than 30% of income
• Pension/Disability
What affects Debt Servicing?
Debt Payment and Household ExpensesEach Lender may calculate debt differently.
• Secured Lines of Credit
• Unsecured Lines of Credit
• Credit Cards
• Personal and Student Loans
• Business Debt versus Personal Debt reporting
What affects Debt Servicing?
Properties OwnedUnderstanding Lender’s guidelines – “Non-
subject” and “Subject” properties…• Add Backs
• Add 50 – 100% back to gross income
• Offsets
• Reduce up to 80% of rental expenses and add the balance back to gross income
What affects Debt Servicing?
Properties OwnedUnderstanding Lender’s guidelines – “Non-subject” and
“Subject” properties…• Debt Calculation Ratio calculators – DCR
• Rent + Principle and Interest + Strata + Vacancy + Insurance + Property Management
• Ratios between 1.1% - 2.2%
• Add surplus or minus shortfall
• Wash out “Non-subject” and “Subject” property debts
• Net Rent Calculators• Rent – Principle and Interest – Taxes – Strata
What affects Debt Servicing?
Properties OwnedUnderstanding Lender’s guidelines – “Non-
subject” and “Subject” properties…• T1 Generals – “Statement of Rental Activities”
• Up to 2 years
• Add surplus or minus shortfall
• Take out “Non-subject” property debts
What affects Debt Servicing?
Properties OwnedIMPORTANT NOTE…
• What is conserved residential versus commercial?• How many “doors” in the purchase property?
• How many investment properties in existing portfolio?
• Lender’s guidelines
What affects Debt Servicing?
Down PaymentHow much do I have to put down?
Where can it come from?• Savings
• Home Equity – “Secured Lines of Credit”
• Joint Ventures
• Private Loans
• Vendor Take Back
• Gifted
What affects Debt Servicing?
Amortization……is the amount of time it will take one to pay off the mortgage
based on the contract rate…• 25 years - Monoline Lenders
• 30 years - Federally regulated Lenders
- Monoline Lenders• Insurance premium paid
• 35 years - Provincially regulated Lenders
• 40 years - Provincially regulated Lenders• Insurance premium paid
What affects Debt Servicing?
Monthly Personal Income 5000
Debt Services Limit (40%) 2000
Personal
Mortgage Payment or Rent 1200
Property Tax and Heat 200
Debt Payments 500
Total Monthly Payments 1900
Portfolio
Monthly Rental Income 4000
Bank Offset (80%) 3200
Total Mortgage Payments 2400
Surplus or Deficit +800
= $2800
The Bank Says “No”!
What affects Debt Servicing?
Personal
Mortgage Payment or Rent 1200
Property Tax and Heat 200
Debt Payments 500
Total Monthly Payments 1900
Portfolio
Monthly Rental Income 4000
Bank Add back (50%) 2000
Total Mortgage Payments 2400
Surplus or Deficit 400
= $2800
Monthly Personal Income 5000
Debt Services Limit (40%) 2000
Use Professionals with Investment Experience
Build YOUR team of experts• Realtor• Accountant/Notary• Mentor(s)• Property Manager• Mortgage Broker
• “NO” does not always mean “NO”!
Never Forget and Always Remember
• Investment property financing• Rate and Insurance premiums may apply• There is ALWAYS a Lender• Interest paid on an “Investment Vehicle”• Know your long term investment goals• Purchasing in a “holding company”• Its all about the CASH FLOW!
The will to succeed is important but what’s more important is the will to prepare…
Bobby Knight
Get in touch with us….
www.geoffleemortgage.comTwitter: @geoffleecaLinked In: http://ca.linkedin.com/in/geoffleemortgage/Email: [email protected]: 1.778.552.3489
If you have any questions please call me at 778.552.3489 or email me at [email protected].
“We specialize in getting you the fastest “YES” at the SHARPEST RATE… GUARANTEED!”
- Geoff Lee