Mortgage Broker

Summer 2019

Mortgage Broker is the magazine of the Canadian Mortgage Brokers Association and showcases the multi-billion dollar mortgage-broking industry to all levels of government, associated organizations and other interested individuals.

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Page 40 of 47

CMB MAGAZINE summer 2019 | 41 coverstory so many variables, but the down payment can go as high as 35 per cent." McConnell says Mortgage Plus lends up to 75 per cent of the purchase price of a vacation property, depending on whether it is marketable. "If it's up in the middle of nowhere, and we know that if we had to sell the property we would lose, we're not going to go to 75 per cent. In that case, we might do 65 per cent. Around here, we have hunting camps on 100 acres, with just a cabin. In many cases, with good credit and ability to pay, we would go to 65 per cent on those, even though many don't have a well or a septic. Banks, on the other hand, they don't like hunt camps." Aer 40 years in the mortgage industry at both bank and brokerage, McConnell says private lenders offer buyers a more customized experience. "A private lender doesn't necessarily look at income to qualify, where a bank does," she says. "With the new stress test, it's very difficult to qualify for a second property. Whereas with a private lender we look at the ability to pay, whether self- employed or having other sources of income. We look at credit – if they've never missed a payment on a mortgage we would finance, even if they have a sloppy credit card record. We're not so concerned about debt servicing." Private lending, says McConnell, is basically an exercise in common sense. "Can they make L ast year, the CBC reported that the price of a recreational home in Canada was expected to average $467,764 by the end of September. e cost of a cottage, cabin or camp differs by region, with British Columbia, Alberta and Ontario at the high end, while Atlantic Canada continues to offer some of the most affordable vacation properties. No matter what type of getaway is being considered, the fundamental rule of real estate still applies: location is paramount. But it's also true that negotiating favourable mortgage terms will depend on whether a property earns an A or B grade. Lenders class recreational homes as either Type A or B properties. Essentially, an A property has a full bathroom, septic and well water; it is winterized with year-round access and set on a permanent foundation. In contrast, a B property may have only seasonal access, with lake water service, no heat source and a floating foundation on blocks or pilings. While there are many special considerations for financing a recreational property, septic and well water are among the most important, according to Kathy McConnell, a mortgage broker with Mortgage Plus in Peterborough, Ont. Located within the scenic Kawartha Lakes region, McConnell does a brisk business arranging private financing for mostly Type B vacation properties, which account for 20 per cent of her deals. "In this area, we still have cottages that use outhouses or chemical toilets," she says. "A lot of lenders won't do it if you don't have a three-piece bath – that's big for an institutional lender. But, privately, as long as there is a septic, we're willing to look at financing. We will do some with outhouses, but the loan to value is always less." Type A properties are considered second homes, so they can be mortgaged accordingly. "If it's an A property, if it fits all the guidelines – it has a well, septic, a year-round road and is four-season – it's considered a home. So, you can buy it with five per cent down," McConnell says. "If it's more of a cottage, so a B property, a lot of banks want 35 per cent down. ere are From cottages to camps to cabins, mortgage brokers share tips and advice for financing vacation properties BY LISA GORDON Planning for a Getaway Kathy McConnell Mortgage Plus Peterborough, Ont.

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