Student housing has long been in high demand and short supply, often resulting in parents scrambling to find their children accommodations, however, XMC Mortgage Corporation has a solution to allay their concerns for years to come.
The lender’s student housing program—a loan of up to $500,000 on a 30-year amortization with 70% LTV—allows parents to buy second properties in which their children can live through their schooling, and can either sell it afterwards or retain it as a rental property.
“In our line of sight, this would be no different than if someone bought a condo as a first-time homebuyer and then rented it out five or six years later,” said Derek Serra, XMC’s managing director. “The primary goal here is to help parents and their children. Needs could evolve down the road, but we’re assuming there will be a scenario in which the property is rented out afterwards, or another scenario where it’s sold to another parent.”
Serra added that the idea was conceived after he travelled Ontario to meet broker partners, many of whom relayed concerns about the student housing dearth.
“Meeting with brokers in either Kingston or Waterloo, there was a real need to help families who had this major life event and needed to prepare their finances to send their kids away to school,” he said. “I remember when I was away at school, it was tough to find a home to live in and find people to live with you.”
Leigh Graham, co-owner of Mortgage Professionals in Kingston, says available student housing has been an enigma in the city for years, and compounding the problem is lenders’ aversion to student-occupied rental housing.
“There’s a natural aversion to financing student housing in the mortgage market in Canada by most lenders, and certainly the top-five banks,” he said. “We’re not sure why but the general assumption in the industry is that the risk of damage and/or the state of the property, in the case of recovery, is considered to be more substantial than a single-family rental or a non-student rental property.”
XMC hopes to lead a vanguard of lenders that support student housing rather than regard it suspiciously, and Serra noted that such programs can also buttress brokers’ business strategies.
“I’d say to brokers they should get out and chat with realtors who they haven’t dealt with before, especially ones who specialize in the student housing space,” he said. “This can give brokers an opportunity to connect with a realtor and present a solution to that realtor’s customer and family. This could potentially help all parties involved.”