Condos in Toronto: Are brokers at a disadvantage?

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Lenders continue to make it more difficult to obtain mortgages for condominiums in Canada’s biggest market and, unfortunately, brokers may be more disadvantaged than their mortgage specialists.

“Condos in Toronto are becoming increasingly difficult to place even for borrowers with very good credit,” Lior Hershkovitz of Mortgage Edge said in a comment on MortgageBrokerNews.ca. “Business is being done; however, it is definitely more challenging.”

And those who locked into a mortgage for a pre-build condo – which most often are obtained through a mortgage specialist in the developer’s office -- seem to be the only ones not feeling the brunt of tighter underwriting.

“The issue doesn't necessarily affect consumers who got builder mortgages/rate holds three years ago, Hershkovitz said. “It affects people who are coming into the market now. Moreover, even the alt-A lenders are being more cautious with condos.”

Brokers are now having to rely on imaginative solutions to ensure their clients receive funding for condo purchases. In some cases, spreading the risk around may be the only choice.

“It depends on the client situation and the income they make; sometimes you need a combination of mortgages from different lenders,” Elisseos Iriotakis, Co-CEO of Safebridge Financial told MortgageBrokerNews.ca. “The B-lenders will usually take on 65 per cent and you fill the gap with a private lender and that will get you to your traditional 75-80 per cent.”

The tightened guidelines may be a result omnipresent fear -- stoked by various sources -- of an impending housing crash that has yet to materialize.

“The media has done a great job of scaring everybody, as has the finance minister,” Iriotakis said. “The lenders are following suit; many of the condos are assumed to be rental properties and if the economy changes, the first property to go will be the rental properties, not the primary residences.”

  • Lior, Mortgage Edge on 2013-09-10 12:35:52 PM

    Brokers are not necessarily at a disadvantage when it comes to condos. It may seem that the grass is greener on the other side but I know two bank specialists who will tell you exactly the same thing... it's more difficult to do mortgages for condos in Toronto. Not only are the income requirements more strict but lenders are reducing their risk to particular buildings through cap rates, lower LTVs, and minimum square footage. It looks like a broader shift by all lenders to reduce their exposure to the Toronto condo market.

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