Commercial Real Estate Loans in Canada

Commercial Property Loans in Canada

First Published Date : July 28, 2010 ADawnJournal.com

The commercial property market in any country plays a major part in its economy, being the point where retail and investment banking meet. There is a lot of encouragement given by any government in the issue of keeping commercial properties running and finding a way for them to keep up with debt repayments so as to avoid the worrying eventuality of a commercial property closing down – thus depriving the economy of the tax dollars from the property and business itself, and the banks of important money from mortgage repayments. It is a lose-lose-lose situation when one takes into account the owner of the business going bust. Yet there is a very real situation emerging at present which suggests that commercial property loans will need to be looked at very closely in the coming year.

Commercial loans are unlike residential mortgages in that the latter are self-amortizing, and as long as the resident has a well-chosen mortgage their payments will shrink in real terms as the life of the mortgage runs down. At a given point with a commercial loan, the payments may well begin to increase, having been agreed on the basis that profits from business will rise year-on-year. Depending on the nature of the loan, the case may well be that the borrower needs to look at refinancing the loan or repaying it in full. There are billions of dollars’ worth of commercial property loan coming due for refinancing or repayment this year – and several companies who are in no position to meet either of these conditions.

At present, the government and the banks are working together to find the best way of ensuring that the mortgage deals hanging in the balance are restructured in a way that leaves no-one too seriously out of pocket. Although the properties which are bought with commercial real estate loans represent an asset that can be repossessed and re-sold, there is still a large level of reluctance to borrow among the general and business public, raising the spectre of commercial properties remaining vacant for the time being. This leaves the banks with assets of limited worth, the government with a reduced level of tax income from these sources, and civic authorities with the problem of empty properties on their high streets – not encouraging for trade, and considered to be injurious to civic pride and all the things which flow from that.

As we were in a recession with a global reach, there are no short cuts where business and commercial real estate financing is concerned. Foreign investment is no more likely than domestic, as Canada is in better shape than most economies worldwide. In order to keep businesses open and trading, some level of agreement needs to be made between the government and private finance so that the best outcome for everyone is achievable. Anyone looking for a commercial real estate loan at the present time may well be in an advantageous position, as there will be breaks available while the government seeks to encourage lending. Everyone is holding their breath at the moment waiting to see how this recession has had its play coming out of recession. Some proactive conduct on the businessperson’s part at this moment might well be sensible.

How To Avoid Extra Costs On Your Mortgage

Extra Costs Can Drain Your Funds

First Published: ADawnJournal.com May 18, 2010

The number one priority expenditure for most families in Canada and further afield is a place to live. There are other things that need to be addressed as a matter of importance, too, and it is not limited to the family home. But without the family home, nothing else really matters. If you don’t have a home to keep you warm, safe and comfortable, then you can have as many cars as you like – none of them will be as satisfactory and as central to your life as your home. Taking your mortgage seriously is therefore an essential matter. As much as you may want to cut loose a little bit when the monthly pay check comes in, it is important to remember that some figures need subtracting before the fun can begin.

The monthly mortgage payment is the first number most people will subtract from their paycheque they are making their month ahead calculations. It is one payment that cannot be missed and should not be compromised. If the situation you find yourself in precludes making a full payment to the mortgage, it is essential to call the lender and seeing if you can work out a payment holiday or, if necessary, a restructuring of the loan. Not bothering to keep the bank aware of how the situation is progressing will only see you receiving angry letters, late payment fees and, eventually, being at risk of losing your house. If you have any way of avoiding it, you should make sure that you do not miss payments – even if it means making reduced payments on other lines of credit. This loan is secured on your home.

Avoiding extra costs on your mortgage is partly a matter of common sense and partly a matter of being able to see where problems will occur before they really begin to cause concern. Seeing a debt advisor to talk through your options and make out a financial management plan is one way in which you may even be able to avoid making reduced payments to the highest of all high priority debts.

Strangely, though, there are some loans (mortgages included) that add on extra fees not only for the late payment or partial payment (or even non-payment) of the monthly debt repayment, but will charge you an early payment surcharge if you pay the loan off in full ahead of time. If this is something you can see yourself doing, then it is worth asking the bank if they have such a policy. Look through the terms and conditions on your loan agreement as well, to see if there are any strange circumstances in which they will add fees to the balance of your mortgage. The less you have to pay on a mortgage, the more money you will have to truly enjoy. For this reason it makes sense to avoid any unnecessary and stupid expense and to find ways of cutting off problems before they can cost you money.

How To Handle Your Mortgage In A Divorce

Divorce and Mortgage

Short of getting married, buying a house with your partner for life (or intended partner for life) is possibly the most concrete commitment you can make to them. In fact, as marriages frequently end in divorce within ten years, and the average amortization period for a mortgage is considerably longer, it could be said that it is in many ways a bigger commitment. Regardless, joining together to buy a house which you will share as a couple is a big move, and bigger still if you are joint account holders on the mortgage. An even bigger move is if you divorce while you are still paying off the mortgage – creating conditions for some of the most unpleasant times of your life, if you do not both swiftly resolve to conduct the entire process with maturity and dignity.

When a couple divorce, there is always a question over the marital home. Will it simply be sold with the couple splitting the money equally or according to a ratio of their choice? Will one partner buy out the other? It is for both of you to decide. It may be that one partner wants a clean breakaway and intends to leave the area, in which case the only thing that remains is whether the remaining partner wishes to stay in the house and can meet the full mortgage payment. It is important at an early stage to consult your mortgage agent in order to find out exactly how it affects your specific mortgage.

There may be some justification for applying for a new mortgage – whether this be for the purposes of buying out your spouse’s half of the equity in the house or in order to search for a new home. If this is the case then it is important to take account of the fact that there will be some changed data on the new application and that you are unlikely to have the same borrowing power as an individual that you did as a couple. Indeed, it is often worth involving the mortgage in discussions between lawyers if the divorce is to be conducted with the help of legal representation. This can help to divide it fairly and equally.

It is also worth taking into account that debt taken out in joint names will affect the credit scoring of both parties. Sorting out the issue of the mortgage is in this case all the more important, as acrimony over a divorce can be multiplied if one partner is considered to be behaving in any way that is injurious to the other. Although the marriage may have come to an end – potentially a very unpleasant end – the couple who are separating will usually have bought the house together at a time when they were very much in love, and its sale, or even departure from it by one of the parties can cause a great deal of heartache. It is sensible in this case to be businesslike although not insensitive, and making things easier will include smoothing out any financial issues – in which the divorce must be considered a priority.

What Is Mortgage Insurance?

Insurance On Your Mortgage – What You Need To Know

First Published: ADawnJournal.com April 2, 2010

If you have a mortgage, then the chances are that you have mortgage insurance. The principle of mortgage insurance is pretty simple. It is usually included in the mortgage when you take it out, with the value of the insurance added to the principal and other fees, and paid into monthly as part of your usual monthly payment. As with any other insurance premium, the idea is that if certain conditions are met and you are unable to make your monthly payments as normal, the insurance will cover those payments. Among the conditions that are relevant to mortgage insurance are: death, illness, unemployment. Depending on your mortgage account, you may be covered in case of all of these and more, just these, some of these or none. It is worth being aware of exactly where you stand regarding insurance on your mortgage.

The most common and all-encompassing reason for claiming on insurance is death. With other reasons for claiming, there can be arguing over the matter of what constitutes long-term illness, a pre-existing condition, the balance of fault for an employee’s sacking or renegotiated contract and so forth. With death, however, things are generally quite final – or so you would think. Having mortgage insurance that covers you for the death of yourself or a joint account holder may seem to mark the end of the argument, should one of you die. But some insurance companies are reluctant to pay out, and will go to great lengths to frustrate a claim. It is worth being very careful with regard to how the insurance was sold to you, and what the conditions are regarding payouts.

If you have filled in a form to purchase mortgage insurance – as part of an overall deal or separately – it is highly important that you read the questions carefully and answer them truthfully. Even if the answer to a certain question might increase your premium, or negate any cover, it is important to do this before you start paying the premiums. You could well find yourself some way down the line bereaved, ill or unemployed and with a claim for insurance being denied by the company for a reason you would consider to be wholly inaccurate and unfair. It is fair to assume, however, that the insurers have written the policy very carefully to favour themselves.

If you have been to the doctor for a routine check up, the chances are that they have run a routine blood pressure test. So if you are asked on the form whether you have been tested for high blood pressure, you will need to say you have. This may go against the spirit of the truth, but saying “no” may be legally considered a lie, and invalidate any claim made on the insurance. For absolute clarity, it is important to get all the terms of the insurance agreement nailed down before taking out any insurance – if it is heavily weighted against you, you will need to insure independently under the terms of an agreement that allows you to be covered fairly.

Is It Our Last Chance To Avoid Getting Hit By High Interest Mortgage Rates?

High Interest Rates And How To Avoid Getting Hit By Them

First Published: April 15, 2010 ADawnJournal.com

The biggest concern for anyone currently looking for a mortgage to buy residential property is the volatility of the market. In the last couple of years, interest rates have fallen not just in Canada but all over the world as the financial situation leads to predictions of dire hardship. However, the measures in place to prevent a total and catastrophic meltdown (and however bad things are at the moment, the word “catastrophic” must be saved for situations that require a completely fresh start rather than a shifting of the boundaries) mean that, after a period of negative financial performance of the kind which we have seen recently, there will inevitably be a period of stabilization and then a recovery of sorts.

The outcome of this is that there is a narrow window, which is getting narrower as time passes, for anyone who has found themselves “recession-proof” to take advantage of the cuts in interest rates before the period of recovery kicks in and, inevitably, interest rates begin to rise again. The lessons of the past years have had the effect of encouraging us all to be a bit more careful, and any rise in rates will be gradual. But there seems to be very little doubt among market experts at the present time as to the feeling that rates will rise, and in five years’ time they will be higher than they currently are. Anyone hanging on to see how far the present rates drop may be disappointed.

High interest rates are used as an economic tool by governments and banks to control excessive market optimism. A few years ago the world in general was in a period of “boom” which was largely the mirror image of the “bust” in which it now finds itself. At that point, interest rates were rising and individuals hoping to get involved in real estate felt that they were being frozen out by “prohibitive” interest rates. Without the factual data, taken over a period of time, to prove a substantive change in the way the world sees economic issues, it is impossible to say how high interest rates may one day rise. If you are in a sound borrowing position, and if you are likely to be in a good situation to maintain your repayments going forward, now is the time to borrow for a house purchase. There may never be a better one.

Those who believe that there is scope for a further drop in interest rates would not currently be well served by waiting for it. It may come, it may not. More likely it will not, but if you like the odds it would at least be worth borrowing on a variable rate mortgage which will drop its rate as the banks drop theirs and rise when the banks do likewise. After five years, the terms of the mortgage can be renegotiated, and people with a good variable rate mortgage will be in the best position to do so.