Have you ever had trouble getting financing for an investment property? If so, you’re not alone.
Investor Mortgages Are Different
Most of the time, if you walk into your local bank branch and tell them you want a mortgage to buy a home, they’ll smile and bring out an application.
However, if you tell them you want to flip a property in 6 months or buy your 5th rental property with a joint venture partner, they’ll often look at you like you have 2 heads.
Why is this?
It’s because most banks don’t understand investors. In fact, most of their business comes from traditional home buyers — their systems, procedures and policies are focused on normal home purchases.
It’s no wonder that when you ask for something out of the ordinary, that you have trouble. And sometimes they might *say* they can accommodate you, but often what happens is that your application ends up going to a head office somewhere and the application is denied at that level.
Long-Standing Customers Don’t Matter
“Not me” you might say. “I’ve been with my bank for 20 years”.
It’s been my experience that the length of time
you’ve been a customer means NOTHING to banks.
Sure, your teller and even your branch manager might say you’ve been a good, long-standing customer and waive fees occasionally, but in the end, the banks are businesses and protecting their shareholders’ profits is paramount to everything else.
You might even think your local branch mortgage specialist or even the manager has control over whether or not your mortgage is approved, but that’s just not the case.
Underwriters Have The Power
Most big banks have what’s called an ‘underwriting’ department, usually located at a head office somewhere. The people who work there are in charge of reducing the bank’s risk as much as possible by putting your mortgage application through a series of tests and indicators.
If you fail to pass the tests, your application is denied.
Often times, these tests are performed by computers and an underwriter must have a very good reason to override what the computer says. They aren’t always willing to do it, especially when their job performance can be tied to how many ‘bad mortgage loans’ they have personally approved.
And that’s not your only problem…
Different Banks, Different Criteria
Each bank has different tests and indicators they look at. So while you might get approved at one bank, you could be denied at another. Or worse, you could be denied at the first bank you approach, and, thinking your deal won’t be approved anywhere, you might walk away from it.
Why are banks like this?
All banks are businesses that evolve independently from each other. If a bank gets ‘burned’ on certain types of mortgages (e.g. loses too much money), they will usually change their criteria to help ensure it doesn’t happen again. So as their business grows and evolves, so do their internal policies and procedures — just like any other business.
Add into the mix the fact that there are literally HUNDREDS of banks, trust companies, and credit unions in Canada, and you can imagine how challenging it may be to find a mortgage lender you can work with, understand their policies, and get approved quickly.
It’s possible, however, IF you have someone on your team who works with MULTIPLE lenders, understands what they want to see, and will to stick up for you for a challenging deal.
Investor Mortgage Broker
In fact, I found someone just like this years ago and he’s helped immensely with getting approvals. But he’s not like other mortgage brokers who work primarily with home buyers. He actually specializes in investors and knows how to overcome the challenges investors face.
Over the years, he…
- Helped me get my financing approved, even though I didn’t have a ‘regular job’
- Stuck up for me when lenders said ‘no’
- Found solutions for deals that were ‘hard to finance’
- and much more
If you’d like to find out more information about him and how he can help you,
click here for more details.
How about you? Have you had challenges getting approved with your local bank?