Which banks use the 1.1 rule?

[RobMacdonald]

QUOTE (PaulW @ Feb 10 2010, 03:20 PM) If I`m following...

If my gross rent was say $2,000 - a bank would take 70% (let`s say) or $1,400 as "income". Let`s just say that my mgtg payment and taxes was also $1,400. Does that suggest that this property would "hold" its own mortgage? Is there a limit on how many properties you can buy under this rule and does this just apply to Alberta where you are from?

Yes, in the case above, your portfolio would have no effect on the application. The number of properties you can buy depends on the lender you are dealing with. Each bank has a threshold per customer. Some are more aggressive than others. You may be able to borrow $1 million to 1.5 million from a bank before they start to get uncomfortable. But then on to the next bank.

The other important point is that some banks will only lend to clients with 4 or less properties. So if you portfolio fits under TD, Scotiabank, Firstline policy, it may be better off using MCAP, Merix, Mortgage Point Financial for your first 3 to 4 purchases. That way, you can save the larger banks for when you are already past the aggregate limits for many mortgage lenders.

 

[PaulW]

QUOTE (RobMacdonald @ Feb 10 2010, 06:32 PM) Yes, in the case above, your portfolio would have no effect on the application. The number of properties you can buy depends on the lender you are dealing with. Each bank has a threshold per customer. Some are more aggressive than others. You may be able to borrow $1 million to 1.5 million from a bank before they start to get uncomfortable. But then on to the next bank.

The other important point is that some banks will only lend to clients with 4 or less properties. So if you portfolio fits under TD, Scotiabank, Firstline policy, it may be better off using MCAP, Merix, Mortgage Point Financial for your first 3 to 4 purchases. That way, you can save the larger banks for when you are already past the aggregate limits for many mortgage lenders.

Thanks for the advice Rob...I will keep that in mind as I develop my strategy...still researching.

 

[kanabel]

QUOTE (RobMacdonald @ Feb 10 2010, 04:27 PM) When CMHC comes into play, the lenders policies even change further. When you refer to CMCH at 50%, what that actually means is that the lenders policy on a high ratio mortgage is for a 50% addback. In other words, they will add 50% of the income to your income and then debt service the full payment.

CMHC`s actually policy on rental income is an 80% offset. But what happens is the lenders choose how much risk they are willing to take. If the lender doesn`t want to got to 80% offset, then they put their own more conservative policy in place. And with an application on a high ratio purchase, more lenders go the conservative route than then CMHC policy.

Thanks Rob! What actually happened is that my broker was telling me that CMHC wouldn`t qualify me because they (CMHC) would add 50% only while the bank (TD in this case) would go with 80% add back if I put 20% down, which I am trying not to. So, I believe, according to what you say, is to look for another lender perhaps, that would be comfortable with 70%-80% add back and pass it on to CMHC like that?

 

[wealthyboomer]

Contact Trillium Mortgage, they are great to work with and will get you the money you need, as they deal with situations like yours.
http://www.trilliummortgage.ca/
phone 416-488-6142

 

[RobMacdonald]

QUOTE (kanabel @ Feb 10 2010, 09:06 PM) Thanks Rob! What actually happened is that my broker was telling me that CMHC wouldn`t qualify me because they (CMHC) would add 50% only while the bank (TD in this case) would go with 80% add back if I put 20% down, which I am trying not to. So, I believe, according to what you say, is to look for another lender perhaps, that would be comfortable with 70%-80% add back and pass it on to CMHC like that?

You`re correct, TD`s policy is 50% addback when dealing with an insured CMHC applicaiton. You will need to find another lender, and there is a number of them out there you could go to, but would need to access the lender through a broker.