Pity the owners of multiple homes in Metro Vancouver: it is getting tougher to find conventional residential financing once they own more than five properties in the world’s second-least affordable market..
“On Monday, another major bank pulled back their policies to only allow for five rental properties maximum, instead of having no limit to the number of rental properties. The move mirrors what most major banks are currently doing right now and leaves very few options for clients with multiple rental properties,” Vancouver mortgage broker Kyle Green of Mortgage Alliance stated in a memo to clients April 21.“It’s getting unbelievably hard to get investors financed, so be prepared to have more limited options if you fall into the five plus category.”
“It wasn’t too long ago that some of our clients were able to acquire 70 to 90 properties through major banks without too many issues,” Green told BIV this week. “Now, some are forced to take on joint venture partners or go to private lenders.”
Green said only two major lenders, Scotiabank and National, continue to lend on bulk residential investments “at competitive rates.”
The reason for the tighter regulations relates to recent restrictions on Canada Mortgage and Housing Corp. mortgage insurance for multiple residential properties, according to Green. He explained that residential mortgages are packaged into mortgage-backed securities that are then sold to investors. Investors, however, insist that all the mortgages be covered by insurance.
An option for those owning more than five rental properties would be to apply for commercial financing, which offers both lower mortgage rates and no cap on the amount of properties, or to finance properties with different lenders.
“We have several clients that hold between 40 to 100 individual rental condo units, and they typically spread these out between a variety of lenders,” said Bryan Dudley of Realtech Capital Group.