Real Estate

Wrap-around mortgages - legal in Canada?

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  • Aug 29th, 2019 4:24 am
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6 replies
Deal Addict
Jan 13, 2014
1770 posts
709 upvotes
Calgary
Nope, never seen it. The problem is in canada the title needs to be free and clear before the next mortgagor can take over. You can do 2nd charge but even that is difficult due to bank policies (maybe a second charge loc from a different fi - generally same FIs are ok with going second charge due to the way the title has been structured). I still cant fathom why this kind of financing exist and if the buyer qualifies why not just get one single mortgage.
[OP]
Member
Sep 17, 2016
308 posts
109 upvotes
masarwar wrote: Nope, never seen it. The problem is in canada the title needs to be free and clear before the next mortgagor can take over. You can do 2nd charge but even that is difficult due to bank policies (maybe a second charge loc from a different fi - generally same FIs are ok with going second charge due to the way the title has been structured). I still cant fathom why this kind of financing exist and if the buyer qualifies why not just get one single mortgage.
This would be useful in a case where the seller can't afford to keep up with the payments and the buyer would not qualify for a mortgage with a normal financial institution . Win win in that case with the seller acting as the lender and obviously having to take some risk
Deal Addict
Jan 13, 2014
1770 posts
709 upvotes
Calgary
TitusBobby wrote: This would be useful in a case where the seller can't afford to keep up with the payments and the buyer would not qualify for a mortgage with a normal financial institution . Win win in that case with the seller acting as the lender and obviously having to take some risk
So basically this will be a B lender deal then. Honestly too much of a risk for any kind of FI in canada.
Deal Guru
User avatar
Mar 23, 2008
12428 posts
8938 upvotes
Edmonton
TitusBobby wrote: For those wondering, like me until yesterday, what a wrap-around mortgage is

https://www.investopedia.com/terms/w/wr ... rtgage.asp

Anyhow, are they legal in Canada?
Posted in your other thread:

So now you want to pay your money to a jobless buyer whose on the verge of being foreclosed upon, and you’ll count on that seller to forward your payment to the lender? And if they stop doing that, they’re no worse off than they were before, but you’re out all the money that you thought was being applied on your loan... All the while paying private lender interest rates, because no A or B lender would touch this with a 10 meter pole.

Sign me up! How can that possibly go wrong?

Why not spend more time looking for an undervalued property that needs some TLC bump up its value rather than some kind of snake oil loan? Thinking outside the box can be a good thing, but there’s sometimes a reason for the box to exist.

C
Deal Addict
Nov 13, 2013
2874 posts
1557 upvotes
Ottawa
CNeufeld wrote: Posted in your other thread:

So now you want to pay your money to a jobless buyer whose on the verge of being foreclosed upon, and you’ll count on that seller to forward your payment to the lender? And if they stop doing that, they’re no worse off than they were before, but you’re out all the money that you thought was being applied on your loan... All the while paying private lender interest rates, because no A or B lender would touch this with a 10 meter pole.

Sign me up! How can that possibly go wrong?

Why not spend more time looking for an undervalued property that needs some TLC bump up its value rather than some kind of snake oil loan? Thinking outside the box can be a good thing, but there’s sometimes a reason for the box to exist.

C
Did you make up that last line? It's good and should be a sticky on here sometimes.
Deal Guru
User avatar
Mar 23, 2008
12428 posts
8938 upvotes
Edmonton
fogetmylogin wrote: Did you make up that last line? It's good and should be a sticky on here sometimes.
Actually, I did :). Thanks for the comment!

C

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