What Type Of Mortgage Best Suited For RTO?

[ClintL]

When you structure a RTO, what type of mortgage is best suited? Do you base it on the term of the actual rent period? Do you use an open mortgage in case the tenant/buyer leaves before the rent period is over (or requires an extension)?

 

[GaryMcGowan]

This is a personal preference choice here.

Of the many RTO properties that we own we have chosen a mortgage that matches the term of the RTO with a fixed interest rate. If we need to extend we will usually take a 1 or 3 year vrm. Which usually has a low penalty to close out early.

 

[markl]

For a time we were getting great 5 year open variable at prime - .7% but alas those ships have sailed. Like Gary we typically try to match up the term. If you are concerned that they might buy out early or there may be an issue you can always stick with a 1 year rate.



Regards,