Major Policy Change from Scotiabank this morning

[RobMacdonald]

Scotiabank announced a significant change to the Rental Property Financing Program this morning.



Products Available: 5 year closed and 5 year VRM - no other products will be available

Eligible Properties : Maximum 5 rental properties per individual, including those financed by other FI's

Interest Rates: Currently 3.74% for a5 year fixed and 3.2% for 5 year VRM



Good news though they finally changed their net worth policy and only require 10% of each property in net worth, rather than the $50K per property.



Unfortunately, Scotia was one of the best lenders for the investor with an extensive portfolio. Now the program is similar to the mortgage lenders.

 

[HeatherBrandt]

Thanks for the info Rob. Not something I would like to be surprised about!



Do you think the same rules apply when renewing at end of term?



Thanks,

 

[RobMacdonald]

I wouldn't expect that the policy change would affect renewals. As long as the mortgage has been paid as agreed, Scotiabank normally doesn't re-adjudicate accounts at renewal.



Unfortunately, it would probably eliminate the option of refinancing the mortgage at some point.

 

[Thomas Beyer]

[quote user=RobMacdonald]I wouldn't expect that the policy change would affect renewals. As long as the mortgage has been paid as agreed, Scotiabank normally doesn't re-adjudicate accounts at renewal.



Unfortunately, it would probably eliminate the option of refinancing the mortgage at some point.
Good insight here Rob !



I own quite a few Scotia mortgages on various rental pooled condos. Would they renew at the "rack rate" or at the "new customer with qualifying" rate which is 1.25 to 1.5% lower usually ?

 

[RobMacdonald]

[quote user=ThomasBeyer]I own quite a few Scotia mortgages on various rental pooled condos. Would they renew at the "rack rate" or at the "new customer with qualifying" rate which is 1.25 to 1.5% lower usually ?


I don't expect that they would off rack rates on renewal. My experience has been that they still price based on relationship, so they will be competitive on renewal as they probably assume you have other mortgage options. The more accounts and services you have, the better the price you should recieve.

 

[Sherilynn]

I have heard that the broker channel gets different answers than the branch. We just closed on a single family property financed directly through the branch. The Scotia broker channel refused the mortgage because we had too many properties, but we were approved through the branch in one day. Could this perhaps still be the case?

 

[RobMacdonald]

I actually find that I get better answers from my underwriter than the branch does. It all depends on the relationship the broker has with Scotiabank and to what level the relationship as a mortgage broker is. If a broker has to deal with the regional underwriting centre, yes it can be difficult.

 

[gwasser]

Does that mean rental property owners are not allowed to have more than 5 mortgages with any financial institution? Regardles of net worth?



Sounds harsh and unreasonable.

 

[bizaro86]

We heard about this a couple of weeks ago, in regards to our sixth rental, which closed with a Scotiabank mortgage yesterday. Our broker was able to get us a relationship exception, but they made it quite clear that it was going to be only for our 6th property (total, not just with Scotia). They also still required the 50k per property net worth.



What lenders are still lending to those with >5 properties?



Michael

 

[RobMacdonald]

[quote user=gwasser]Does that mean rental property owners are not allowed to have more than 5 mortgages with any financial institution? Regardles of net worth?



Sounds harsh and unreasonable.





Unfortunately, that's what this means. Hopefully, there's a possibility of getting exceptions in certain circumstances.

 

[RobMacdonald]

Sounds like you managed to get in just under the wire. The good news in the policy change is that you are no longer required to prove $50K per rental property. They have amended that requirement to 10% of value in each rental property in overall net worth. So that 's a substantial improvement.



For lenders offering to finance > 5 properties, it leaves TD, Firstline, National Bank and possibly a few 'mortgage lenders'. Each have their own quirks and LTV's, but definitely the change with Scotiabank was substantial.

 

[bizaro86]

[quote user=RobMacdonald]Sounds like you managed to get in just under the wire. The good news in the policy change is that you are no longer required to prove $50K per rental property. They have amended that requirement to 10% of value in each rental property in overall net worth. So that 's a substantial improvement.



For lenders offering to finance > 5 properties, it leaves TD, Firstline, National Bank and possibly a few 'mortgage lenders'. Each have their own quirks and LTV's, but definitely the change with Scotiabank was substantial.



Yeah, they didn't really want to do it, and required substantially more information thatn we've given them in the past for similar mortgages. (I was ready to offer fingerprinting and a urine sample just to complete the file, but it didn't quite get there!)



The net worth change is only an improvement for those who aren't completely ruled out by the new requirement, although I could see how that could help some get from 3 to 5 doors more quickly.



I guess if I want to buy more properties I'll have to learn some new requirements, or put up more cash per door (ie TD, which IIRC wanted 25-30% down).



Regards,



Michael

 

[flyingsquirrel]

Hum, but isn't 10% down considered risky? Considering the skyrocking house price.

30% can help me sleep at night.

 

[bizaro86]

[quote user=flyingsquirrel]Hum, but isn't 10% down considered risky? Considering the skyrocking house price.

30% can help me sleep at night.




Scotia still requires 20% down, same as before. They haven't allowed <20% down since the gov't changed the rules.



Michael

 

[ChrisDavies]

The 10% is for personal net worth per property, not downpayment.