Specific Question About Current Condo Unit/Mortgage Application Process

[iggyntangs]

~~Posted in the Real Estate Sub-Forum As Well, But Posted Here Because Felt It Would Get More Views, Mods Please Feel Free To Merge~~

So for anyone with any knowledge in the real estate industry period I was wondering if someone could help with some advice or perhaps just more knowledge on the subject matter that could help me out in understanding my current situation.

I'm a first-time home buyer and made a conditional offer that was accepted Friday before last on a condo unit at Vetro in Calgary. The "Condition Day" (when the conditions had to be waived) was for this Friday at 9PM.

This past week was to secure a mortgage, review condo documents and things of that nature. I had the condo documents reviewed professionally and for the most part from what I was able to ascertain things looked in good order and the condo seems like a good condo to buy into.

The mortgage part is where the real situation arose I have 15% down payment ready for the condo and I had a few rates held for me at the pre-approval stage at 3 banks: First Calgary, ICICI and BMO.

First Calgary went through the application process and at the very end when everything on my end (financially and credit wise was okayed) I was told that CMHC nixed my application because Vetro is an 18+ only building and CMHC will not support that (after looking into that a bit online that did seem to add up). ICICI had the ability to go thru Genworth and/or Canada Guaranty for insurers so I tried to go thru them, however Genworth said no because they did not like the current landscape in the condo building in terms of how many commercial owners to renters to regular owners (like myself would be) there are, and when asking Canada Guaranty they basically said they would not insure if Genworth was saying no as well.

Now the above upset me and really confused me as to understanding how anyone at Vetro could possibly have a mortgage without having put at least 20% down payment to avoid insurers all together.

When I asked a mortgage broker to look into the situation, she herself said that the few lenders she was asking thru on my behalf were hesitant to approve a mortgage because of the fact that insurers were saying no to Vetro.

Finally I came upon BMO that basically said they would approve it, if I could get 20% down payment to avoid insurers all together. To get to 20% however they need to get the property appraised, which is what they're doing over the weekend since I was able to get my "Condition Day" extended to this Tuesday.

Here's where I am at now...I'm wondering how unique/odd my situation really is, since I've known a few people who have bought into Vetro and have nothing but great things to say about it especially since seeing how it is so new (2008)? How hard will it be to resell down the road if there is this much fuss about it now?

Finally to make the extra 5% down payment the only way I could think of coming up with it (without being gifted it, which I won't) was to take out a personal LOC (line of credit) thru BMO...I'm wondering is there anyway else to make it up that I may be missing that may be a better option since it requires a 2% payment/month (~$300-$400 extra on top of my mortgage) and runs at a 9.25% interest rate?

Any help regarding my issue would be much appreciated, thanks.

[iggyntangs]

In terms of making up the 5%, I was considering a HELOC? I'm not too versed in this so if someone could help me out regarding that would be great. From my understanding you can only get one from existing equity from a home? If true then I could get a LOC and then when I get enough equity take out however much is left on my LOC from a HELOC to pay it off since a HELOC's interest rate is about prime instead of prime + 6ish % and also this would give me much more manageable monthly payments if I wanted since that 2% ($300-$400ish) monthly would not be required with a HELOC?

Anyway let me know whether or not that sounds viable to make up the 5%, thanks.

[bizaro86]

Originally Posted by iggyntangs

In terms of making up the 5%, I was considering a HELOC? I'm not too versed in this so if someone could help me out regarding that would be great. From my understanding you can only get one from existing equity from a home? If true then I could get a LOC and then when I get enough equity take out however much is left on my LOC from a HELOC to pay it off since a HELOC's interest rate is about prime instead of prime + 6ish % and also this would give me much more manageable monthly payments if I wanted since that 2% ($300-$400ish) monthly would not be required with a HELOC?

Anyway let me know whether or not that sounds viable to make up the 5%, thanks.

I'm afraid I can't be much help, but I do know that you can only get a heloc up to 80% of the value of the property. So if you get a mortgage for 80%, you won't be able to use a heloc to get up to 85%. Good luck, that's a tough situation.

[iggyntangs]

Originally Posted by bizaro86

I'm afraid I can't be much help, but I do know that you can only get a heloc up to 80% of the value of the property. So if you get a mortgage for 80%, you won't be able to use a heloc to get up to 85%. Good luck, that's a tough situation.

Hmm well an LOC at its minimum payment would take ~5 years to pay off, would I be able to get a HELOC ~1-2 years down the road to pay off my LOC, is that allowed or? Thanks for any help again.

[bizaro86]

Originally Posted by iggyntangs

Hmm well an LOC at its minimum payment would take ~5 years to pay off, would I be able to get a HELOC ~1-2 years down the road to pay off my LOC, is that allowed or? Thanks for any help again.

You could probably get an HELOC in 1-2 years if your place appraised a bit higher. Example (for easy numbers) if a 100k place had a 80k mortgage, 15k down, 5k LOC, you'd need it to appraise for 106,250 to borrow the extra 5k back. Obviously the place in Vetro would be multiples of that, but the concept is the same.

[mrkajz44]

It's hard to give too much advice without knowing all the numbers. I am just guessing that the amount you are short is about $10K - $15K based on what you've posted so far.

I found myself in a similar situation when I got a mortgage last year. The condo next to my building had burnt down and therefore the resale prices were horrible. This made the bank value my place very low. Long story short, I needed to come up with an extra $10K.

I was already pre-approved for an unsecured line of credit for $15K and I used that to make up the difference. However, I'm not sure I'd run it that close again. If something went wrong (large car repair, lost job, etc) I would have been in really deep trouble. Judging by the fact that you want to pay off the LOC in minimum payments, I'd say you also pretty close to just making ends meet.

I was able to pay of the line of credit in about a year so now that's not over my head. I guess my advice is not to take out a LOC and plan to min pay it out over many years. It's a little too risky in my opinion, based on my experience.

However, if you did want to do that, and you were able to build up some equity in the home, you could potentially get a HELOC to pay off the LOC. Just make sure you tell the bank (really!), becuase they already know about all your debts, so might as well be up front about it. However, if you are just starting a mortgage you're likely only paying off like $300 or so (maybe even less) a month on your mortgage. So after two years you'd have about $3,600 of equity - not very much and likely not enough to pay of the LOC at that point.

My advice is not to push yourself to your credit limits right now. It may work out, but its a stressful time for sure and I don't recommend it for anyone.

[ranchlandsselling]

I think you're stuck finding the extra 5.0% wherever you can get it.

Let's say you're now at 80% LTV and you have an additional 5.0% LOC. With you're second post you're wondering if you should take at an HELOC at a later point to pay off the 5% LOC. That makes a bit of sense, but using your amortization figure out how long it will take you to pay down your 80% mortgage to 75% to get that 5.0% back to pay off your LOC. Ideally you should make your 80% mortgage paydown as slowly as possible and aggressively pay off the LOC.

How much $$ is this LOC you need? You should really just try to pay it off vs. carry it while paying down mortgage than swapping the debt. If you're planning on paying down the mortgage enough to take it back out via HELOC you should just do the LOC first.

Next option is perhaps looks elsewhere if you havent removed conditions. Do you want to live in a condo building that has that high of a rental portion? Any chance you'll end up with a kid? lol.

Good luck!

[jjbouma]

I don't have any suggestions, but that seems odd. When I bought my condo (in Sasso) a couple of years ago I had 10% down and qualified for CMHC. Sasso is also an 18+ building and is built and managed by the same people as Vetro. My mortgage was through Scotia if that makes any difference.

[Cecil Terwilliger]

Originally Posted by jjbouma

I don't have any suggestions, but that seems odd. When I bought my condo (in Sasso) a couple of years ago I had 10% down and qualified for CMHC. Sasso is also an 18+ building and is built and managed by the same people as Vetro. My mortgage was through Scotia if that makes any difference.

Too many other factors to just say because yours worked that the OPs should have.

I've actually heard that CMHC is getting really anal because they are at or near their insurable limit as per their guidelines/rules (or some similar type scenario). I'm sketchy on the exact details but I've been told that Genworth is a much better option right now.

[iggyntangs]

Genworth won't insure because of the renters/commercial owners landscape, basically 2 different reasons for both insurers to say no.

I'm just confused because I've heard nothing but great things about Vetro, it's a new building with a great condo docs review, the unit and location itself is great for myself too with a fair selling price IMO. I just dont understand why this is so hard to secure and yes it does scare me it's this difficult, but again from everything I've heard this is the type of condo to invest in, I just want the best possible way to make up that $15,000 remaining with has little interest paid off in the end as possible.

[ranchlandsselling]

Additionally - the goverment might look at restricting HELOCs to 65% and be ammortizing. So a few years down the road your HELOC option might not even be there.

Regarding what someone said about the CMHC insurance reaching it's limit. From what I understand, that won't be so much of an issue to the end consumer seeking mortgage insurance but instead to the bank who go to CMHC to insure large pools of uninsured mortgages.

Here's something I found on it.

Not really on-topic but it was brought up.

http://www.canadianmortgagetrends.co...nce-limit.html

[albertGQ]

I would be careful purchasing that condo. If you can only get a mortgage if you went conventional, you may have problems when you try to sell it. First time home buyers will have a hard time coming up with 20% down. And people with a sizable down payment usually buy houses. CMHC does not insure any age restricted condos so they probably didn't know your friend's condo was 18+. I'd probably look elsewhere if I were you. Looks like your condo won't be too marketable when you eventually sell.

[iggyntangs]

Originally Posted by albertGQ

I would be careful purchasing that condo. If you can only get a mortgage if you went conventional, you may have problems when you try to sell it. First time home buyers will have a hard time coming up with 20% down. And people with a sizable down payment usually buy houses. CMHC does not insure any age restricted condos so they probably didn't know your friend's condo was 18+. I'd probably look elsewhere if I were you. Looks like your condo won't be too marketable when you eventually sell.

Is it that simple to look at it that way? I see myself being at a condo for 5 years, will it be this difficult to resell this unit then as well? Or is it possible things will change again?

[ranchlandsselling]

This could stay the same, improve, or get worse.

If something is difficult to purchase it's going to reduce the pool of potential purchasers thus making it more difficult to sell. Unless that is factored into the price and by comparison it is cheaper than a very similar unit at a similar property that is easy to finance.

Unless you find that one person that it appeals to at a certain price point and they buy.

[bizaro86]

Originally Posted by ranchlandsselling

This could stay the same, improve, or get worse.

If something is difficult to purchase it's going to reduce the pool of potential purchasers thus making it more difficult to sell. Unless that is factored into the price and by comparison it is cheaper than a very similar unit at a similar property that is easy to finance.

Unless you find that one person that it appeals to at a certain price point and they buy.

In a building the size of Vetro there is probably always going to be a few units for sale at any one time, likely even more than 1 of each floorplan if they become harder to sell.

[iggyntangs]

Question:

Just wondering is there ANY way to find out if the condo building in question can/won't be accepted by insurers before the whole hassle of making up a conditional offer and having it accepted only to have it seemingly fall thru because insurers don't like the property for various reasons?

From what I understood lenders can find out within an hour turnaround time whether or not CMHC, Genworth or whoever will insure on a property.

Anyway, any advice would be greatly appreciated, thanks.

[onetwo_threefour]

^ Not easily, you can ask your mortgage broker if they have any direct contacts weithin CMHC and Genworth to answer questions like this, but there is no publically available resource for 'blacklisted' properties. I wish there was, it would make my job easier too...