A New Option for Rental Financing: Street Capital

Street-CapitalFinancing a rental property has become tougher and tougher in recent years. So any time a new rental lender comes along it’s a positive for investors.

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

Rental-Home-FinancingIf brokers were given a wish list for this product, it might include two things:

  1. 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.)
  2. 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)

  1. It is welcome offering.
    3rd thing a Broker might want to add on that wish list …a more favourable percentage of gross rents that can be applied to income.
    I still feel 50% is an unreasonable figure to apply.
    1 step at a time.

  2. Street does have a rental worksheet for other properties aside from the primary and from my comparisons, it is a decent worksheet. Something to note though is this program does have a net worth requirement. Not complaining though, I am glad to see more options out there and hopefully this will encourage other lenders to expand their product line up.

  3. I still think the “add on” income approach is antiquated ( and unduly conservative)for the average rental investor and the markeplace. Acting more conservatively than the 80% offset of the “good” days could mean lowering the offset to 75% or even 50%, if needed. Using offset vs add-on makes much more common sense, and doesn’t hamper a good client with large equity in his prin res, and average mortgage size to being able to take some extra cash and invest in an “investment” property ( it actually is supposed to make money). Offset treats the purchase as an investment (can it stand on its own and, if not, can the losses be handled) rather than treating his investment in a second property as a debt and including in TDS. A $1,000 rent becomes $ 500 and then at 40% tds, $ 200 credit given to help service the new mtge (or higher than 80% offset) This is not an investment mortgage product, despite it being better than many in the marketplace

  4. I thought you could exclude rental property taxes and heat from the TDS calculation when using the 50% add back method, no?

Your email address will not be published. Required fields are marked *

Copy link