Ben Schmidt of http://www.benschmidt.tv a Fredericton NB and Oromocto NB Real Estate Agent video blogs about an interesting financing situation
Interesting situation. My buyer has a 20% down payment and is willing to bring another individual to co-sign on a mortgage. This co-signer makes a significant amount of money and has enough assets to pay for the property in question 3-4 times overs. So we feel that the financing is a slam dunk!
WRONG!
The bank decides that this property is "too risky" because all the last names on the leases are different. they tell my buyer that it is a "boarding house" and they don't want to deal with boarding houses. This house is anything but a boarding house. A rooming house would be if each room had an individual lease attached to it.
So we decide we will try and finance it personally. The bank accepts! They are willing to take 10% down payment, no co-signer as long as the buyer lives in one of the units! It made no sense to anyone involved why the bank would be willing to loan more money, and not want a co-signer just because now the buyer lives in the property.
The only reason I can come up with would be CMHC. Canada Housing Mortgage Corporation. Basically an insurance company, that ensures the mortgage balance to the bank. So if the buyer ends up in default and cannot make the payments, the bank will be paid the balance by CMHC and they will take over the defaulted property.
Banks are all about risk and that is the only reason I can come up with, as to why the bank would accept less money and not want a co-signer.
If that makes sense or if you disagree make sure you give me an email at ben.schmidt@me.com and thank you very much Fredericton we will be talking to you real soon ;)