I talk about this often but it’s always good to repeat valuable pieces of information – especially if it saves someone from wasting their time. One of the biggest misconceptions people have is that their bank has their interests in mind. I am not saying that banks do not care about their clients but I do think it is important for people to know that banks are businesses not charities. As such they have a business plan, target customer types, sales goals, profit margins, etc. which all attribute to their ability to help someone looking to borrow money. Many people think that just because they know their banker they can ask for whatever they want and if the bank says no that they have no other options. Here is how it really works.
Disclaimer: I am not a lawyer. This is one of those topics that causes heart burn for individuals and businesses that may be unfamiliar with how banks and lenders operate. This topic is almost as bad as discussing bank fees – but not quite. What is a guarantee? A guarantee is an agreement that either you or your company is liable for a debt or obligation. There are 2 basic kinds of guarantees: personal and corporate. A personal guarantee means you are liable for a debt or obligation and a corporate guarantee means your company is liable for a debt or obligation. So what’s the big deal? Continue reading “Who owns a piece of you? (Understanding guarantees)”
Admit it. Either you or somebody you know has had that experience of getting excited to go on a date only to be more than disappointed. It wasn’t the event that they went to or the restaurant they ate at or even the conversation – it was usually the let down from the over promise of what they were expecting from the date. In the past week I was reminded that going on a bad date is like working with a bank to get a mortgage or loan. Banks have many layers of people and systems that need to work together in order to lend you the money you are looking for. A bank manager may genuinely have good intentions when they tell you “yes we can take a look at your request” only to tell you later “sorry our credit department has declined you”. What a let down. I did some research to see how people avoid going on bad dates to see if there were some ideas I could borrow when helping people (and businesses) work with a bank.
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.
Here is an excerpt from a major bank in Canada that sent a message to brokers today (keep in mind that today is October 18)
“we…currently working on deals that were submitted on Friday October 11…please set proper expectations with your clients and referral resources…”
There is much more to the message but you get the idea. This bank is only looking at requests they received October 11 and are running a week behind. Why is this important? Continue reading “Bank is 7 days behind (and its not their problem)”
You may not know this or even have considered you would need this – but we all do. We all need a champion for our cause. Without a champion is can be hard to get to where we need to be or to get what we are looking for. In my experience over the past 18 years working to get money for people and businesses I can attest to the importance of having someone support your cause and help you fight the good fight. Continue reading “Who is your champion? Don’t have one? Get one.”
It doesn’t happen often but sometimes we get to the last days of a deal when all of the pieces can be broken a part by one small unforeseen change. Recently we helped a client purchased a newly constructed townhouse with a well known builder who at the last moment had one of these unforeseen changes happen. The client needed a mortgage that was equal to 80% of the purchase price and had the remaining 20% in cash as their down payment. One of the items the bank had requested was an appraisal Continue reading “$9,000 almost cost a client their new construction home”
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”
Often the question is asked of us from people and businesses looking for a mortgage: “What is the difference between a bank and lender”. They are usually responding to our mortgage quote that they receive indicating the different financing options Continue reading “Bank versus lender”
“Good work ain’t cheap and cheap work ain’t good”
Isn’t the only saying true – you get what you pay for. This is especially true when using a broker. Most brokers that help you find financing earn a commission for successfully finding you the money you need. Because you don’t pay them like you would any other professional you may be less impressed with the level of service delivered. The reason is simple – if you are not paying someone to look after your interests chances are very good that they are taking care of their own interests at your expense. Continue reading “You get what you pay for”