The latest option comes from Street Capital, one of Canada’s largest non-bank lenders. Its new “Small Rental Program” launched today.
The best part: It comes with no rate surcharges and no insurance premiums up to 75% loan-to-value (unlike many other rental lenders).
Here are more of its key features and guidelines…
- Term: 5-year fixed (other terms may eventually be rolled out)
- Max. Loan-to-Value: 80%
- Max. Debt ratio: 40% TDS (no GDS requirement applies)
- Property types: Marketable 1-4 unit properties in urban areas (including condos)
- Maximum amortization: 30 years (with no rate surcharge at 75% LTV or less)
- Down Payment: Must come from one’s own resources (It may be borrowed from a secure line of credit, but it cannot be gifted)
- Proof of Rent: Street allows market rent letters on exception for purchases where there is no history of rental income. Otherwise T1 tax returns, lease agreements, or bank statements showing 12 months of rent are expected
- Rental Treatment: 50% of the gross rent may be added to income when calculating the borrower’s debt ratios
- Insurance Premiums: No insurance premiums apply up to 75% LTV (Between 75.01 and 80% LTV the premium is 2.50%)
- Minimum Credit Score: 680
- No insurance premium from 75.01% to 80% LTV. (Unfortunately, premiums in this LTV band are par for the course with most non-balance sheet rental lenders.)
- Applicability to borrowers who own more than four rental properties (Street’s limit). We suspect this four-property cap may be the insurer’s preference.
Quibbles aside, it’s fantastic for brokers and investors to have another rental financing option in their toolbox, especially one that doesn’t charge rate or insurance premiums on most applications.
According to Mortgage Mentor President Rick Robertson, of the top 19 rental lenders in the broker channel that his service tracks:
- Only 7 offer their best rates on rental mortgages
- Only 8 don’t add insurance premiums to rental deals
Robertson notes, however, that other qualification criteria (e.g., how a lender calculates debt servicing) are typically even more important than rates or insurance premiums when selecting a rental lender.
Street anticipates that this new rental program will comprise roughly 5% of its total business going forward. We’ll take the over on that bet because it’s a solid program and one that will certainly take share from other lenders.
Street Capital is Canada’s fifth biggest broker-channel lender according to D+H, and a subsidiary of Counsel Corp. (TSX: CXS).
Rob McLister, CMT (email)