I just came across an interesting deal: the client approached the broker asking for a $2.6M dollar line-of-credit on a new luxury home being built worth approximately $4M dollars. There is an existing $350K construction loan and the property is now 98% completed.
As you know, most lenders are willing to place a mortgage for that amount, but a line-of-credit??? This takes some outside the box thinking. Just some background, the client has a holding company with approximately 30 rental properties that he manages.
He’s figured out the perfect way to use other people’s money (bank + tenants), to pay down his mortgage debt and provide a very lucrative cash-flow. His goal: to add 5 – 6 more properties to his portfolio over the next 12 – 24 months, hence the need for the $2.6M line-of-credit vs. being charged interest from day one on a $2.6M mortgage.
How The Broker Structured The Deal
There aren’t many traditional lenders in Canada that offer 65% LTV line-of-credit on a $4M luxury home. But there are non-traditional lenders, banks and credit unions, that have specialized lending divisions to consider these opportunities. These lenders will not pay the mortgage broker the way traditional lenders do, so it was very important for the broker to:
- Explain his commission up front (1.00%),
- Have the client sign a Letter of Exclusivity,
- Have the client sign a Letter of Direction.
This was needed because the broker was going to introduce his client directly to his lender. Without the Letter of Exclusivity and Direction, there is no guarantee the mortgage broker would get paid and would essentially be working for free.
The client also needed to provide the following to the broker so that the broker could put together a business case for the lender:
- T2 General for Holding Company,
- 2-years Financial Statements for Holding Company,
- T1 General & NOA,
- As much detail as possible on the 30 properties (Addresses, Type of Property, Appx. Value, Mortgage Debt, Rental Income).
Without all of this in place, the broker would have not been able to submit a strong application. The stronger the application, the faster the approval, the less conditions that come back from the lender and the greater success rate of getting the deal done.
The client was extremely happy with the speed, efficiency, professionalism and the brokers’ ability to secure the financing solution he was looking for to further enhance his investment portfolio. There is no doubt in our mind that this client will be talking about and referring other high-net-worth-clients to this broker.
- Confidently source outside the box lenders,
- Properly structure multi-million-dollar deals,
- Identify and work with high-net-worth-clients and their inner circle(s),
- Develop a network of referral partners that endorse & recommend you to their affluent clients,
- Give you the branding and a designation that will instantly set-you apart from your competition.
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