a) Loan-to-value

Most Lenders have a policy called a “Sliding Scale” to limit the loan-to-value on properties in excess of $1m.  Lenders begin their sliding scale at different values according to their individual policies while also having various loan-to-values based on a tiered amount. 

Example:

Property value of $1,500,000

Lender begins Sliding Scale at $1m

Tier: 80% of the first $1m; 50% of the amount exceeding $1m

$1,000,000 x 80% = $800,000

$   500,000 x 50% = $250,000

Based on a purchase price of $1.5m, the maximum mortgage financing is $1,050,000 which is LTV = 70%.

b) Specialized Mortgage Program – Non-resident, Stated income ( BFS ), etc

When applicants are approved under a specialized program such as Stated Income or Non-resident, a maximum mortgage amount normally appliesas does a Sliding Scale at a reduced loan-to-value.

Example:

Property value of $1,500,000

Lender begins Sliding Scale at $1m

Tier: 65% of the first $1m; 50% of the amount exceeding $1m

$1,000,000 x 65% = $650,000

$   500,000 x 50% = $250,000

Based on a purchase price of $1.5m, the maximum mortgage financing is $900,000 which is LTV = 60%.  This is due to the use of a Specialized Mortgage Program.  Some Lenders cap the mortgage amount under this program at $750,000 as a maximum mortgage while others offer higher amounts. 

c) Mortgage Insurer Guidelines

Under the new Federal mortgage guidelines, an applicant purchasing a property in excess of $1m is not eligible to apply for mortgage insurance.  In other words, this applicant must have at least 20% down payment.  An increase in the down payment may be required, depending on the specific file itself.