One of the biggest challenges many buyers face within the mortgage industry in securing “Mixed Use” mortgage financing. This process can take a tremendous amount of time, especially when it’s required for: Construction loans, Mortgage refinancing and Property acquisition.
First, before we get too deep here, you need to understand what mixed use property is. To put it simply, it’s a property zoned for both commercial and residential use. So, a mixed use property is one that is both commercial and residential, such as retail stores with apartments above or behind them. However, there are other types of mixed use properties that come with their own mortgage financing challenges.
The most common challenge that buyers face surrounding financing, is the actual amount of financing they can secure for their mortgage. Most lenders that consider mixed use property financing typically don’t go beyond a 65 percent loan-to-value (LTV) ratio. However, for certain property areas it is possible to get up to 75 percent LTV, whereas other borrowers may only be able to secure 50 percent LTV.
The downside for lenders is when it comes to mixed use mortgages they generally bear all of the financial risk, since these types of mortgage have no insured loan programs.
With all of that being said, mixed use properties are also considered to be commercial mortgages too, which typically requires more critical observation and examination during the review of the loan application, when compared to a residential mortgage. Now this presents another challenge, how long it takes to secure financing for mixed use properties.
A mixed rate mortgage can take 1 to 2 months, or longer. This depends on the requirements of your lender when it comes to assessing your property and third-party verifications on appraisals, environmental assessments and financial statements.
If you’re hoping to speed up the mixed use financing process, then you could always consider a private lender as their requirements aren’t as strict as Canadian banking institutions.
Finding a suitable lender to finance your mixed use property can also be quite challenging. If you’re applying for a smaller loan, say $250,000, then most banks won’t even consider your application because it’s not in their benefit to do so. Credit unions on the other hand would be a perfect lending source for smaller loans such as this, however keep in mind your LTV could still be anywhere from 50 to 65 percent.
No matter what type of financing you’re trying to secure, you’ll still require a large portion of equity.
You could also approach trust companies, so long as they’re allowed to incorporate these mortgage types into their portfolios. They may have restrictions in this sense.
If you’re considering a mixed rate mortgage you should always plan ahead. Speak to an AKAL mortgage agent today.
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