We recently completed a mortgage for client that was refinancing his property to get a larger mortgage and use the additional funds for investment purposes. The bank that he was looking to pay out had a clause in their mortgage that basically read “you cannot payout your mortgage unless the property has been sold”. This means that the bank would not allow the client to payout the mortgage unless he produced a sale agreement showing that someone unrelated to him was purchasing the property. Needless to say the client was extremely upset and couldn’t believe this clause was not explained to him when he took the mortgage.
Talk to any banker, lender, mortgage specialist or broker about paperwork and one of their biggest frustrations would be “when clients send me their information in bits and pieces over dozens of emails and faxes”. It’s amazing that everyone needs access to the documents and information associated with a borrower but there is no streamlined system or platform for everyone to use to easily share their information other than email messages, faxes and plain old fashion photocopies.
I was sitting with an RBC mortgage specialist today who is also a good friend of mine. We were discussing the woes of life and catching up on industry news and market changes. He mentioned to me that he didn’t realize that commercial mortgages required so much time to not only get approved but to get funded. He specializes in residential mortgages and passes commercial mortgages along to a colleague who specializes in commercial mortgages. In the last referral he made it took a few months just to get the paperwork together.
Given the numerous construction deals that our office has seen over the past half year, I thought I would provide some details on how construction mortgages work with particular focus on the concept of “cost to complete”. Banks and lenders use two primary ways to determine their exposure on a construction deal. One method is referred to as Loan to Value and the other method is referred to as Loan to Cost. They may sound the same but they are significantly different and can change the entire risk profile of a deal in the eyes of a bank or lender.
This morning I had breakfast at a new restaurant in Calgary called Red’s in Ramsay (Facebook page) who also happens to be a client. Earlier this year I was able to arrange construction financing for the company and this morning had the privilege of seeing how great a job they did. This is their second location to be opened and you would understand why if you have ever been to their first location on 4th Street – always busy and definitely the place to go.
It’s not every day that a company will share the complaints it receives from its customers but I thought it would be a great opportunity to address some of the things we deal with that people may not know or care to know. Over the past 12 years I can assure you that not every client we have done some work for has been our biggest fan. Sometimes we have made mistakes, other times we have addressed situations that in hindsight should have been handled differently. We are people who are subject to shortcomings and failings like anyone else but we always look to make the best decisions we can to help our clients do more. Continue reading “2 clients that hated our service”→
If someone were to ask me “what is the one topic you have to answer or address most often” I would without hesitation say interest rates. Borrowers are always very intent on knowing what interest rate they will get, the reasons behind why one bank or lender charges more than another in addition to telling me what interest rate they think they should pay without having a sense of how interest rates are determined or how their specific situation impacts the answer. I could spend time explaining why this is a popular topic however I thought it would be more interesting to share an example of how a bank or lender would address the topic if they were perceived to have a higher Continue reading “The one topic I address most often”→
Another big file off our desk this week. We completed our third transaction for a group that purchases land and then works to increase the value for eventual sale or development. At a little less than a quarter of an acre the borrower did a great job of negotiating the purchase price and undoubtedly will have a successful development on their hands in the future. This transaction is interesting for many reasons the least of which is Continue reading “CASE STUDY – Land…they are not making more of it”→
I am just wrapping up a construction mortgage for a group of folks that are opening a second restaurant in Calgary, Alberta. There are several things that make this transaction unique from other conventional commercial mortgages I broker and advise on – the cost of construction and the single use of the building. Continue reading “CASE STUDY – Build a restaurant and they will come”→