An increasingly tight but competitive Toronto market has lenders migrating back to the 80-per-cent rental offset, say brokers focused on property investors and now finding it easier to get their deals funded.
“Prior to April 2010 a lot of lenders used the 80 per cent rental offset, which brokers favoured because it allowed their client easier qualifying and greater purchasing power,” Sebastien Ballin, an agent with Mortgage Alliance - Mortgagelinx Financial Corp., told MortgageBrokerNews.ca
“What we then started to see post-April 2010, when CMHC introduced the changes to the rental program, was that it became more challenging to find lenders willing to use the offset, with most of them instead tabbing for a 50-per-cent add-back onto the client’s total income. That wasn’t as favourable to the client. But what we’ve seen in this highly competitive market for lenders is that most of them have reverted back to the 80 per cent offset -- some making the move as early as October 2010 -- in order to offer the most competitive product.”
It’s a trend other brokers are making note of and, indeed, welcoming as the Toronto condo market remains hot, driven in large part by investor interest. New mortgage rules, introduced last year and effectively forcing those investors into conventional mortgages, had helped to cool down that niche market for brokers. That more conservative policy is still in place, but investors, many leveraging the equity they have in existing holdings, remain the driving force behind condo sales in Canada’s urban centres. Toronto and Vancouver are not exception.
The increased willingness of broker channel lenders to stick with the standard 80-per-cent offset is helping brokers like Ballin more quickly place those deals. A Toronto vacancy rates as low as 1.6 per cent – and not, in fact, expected to increase in the near-term – is likely bolstering the more liberal guidelines of lender working Canada’s largest market.
The newly aggressive stance of lenders is also evident in the tweaking of guidelines for equity lending, said Ballin, who often uses that for his business-for-self clients, unable to present the kind of proof of income most A-lending requires.
“Investment deals account for about 25 per cent of my business, and the help lenders are giving us in terms of being able to claim our share of Toronto`s condo-rental market is really important,” said the agent, now three years in the business.