small condo and mortgage

[aabbcc888]

I read that it is harder to obtain a mortgage for a small condo (less 600sq ft). Is that true?

 

[simuls]

I don't think this is true. However, two friends of mine were recently denied mortgages because valuations have become unsustainable and too high. So while they were prepared to pay, say $350 000 for a condo, the bank would only value it at $310 000 and mortgage for $260 000, leaving them on the hook for a 25%dp, which they couldn't afford. This might be what you're hearing about.

 

[cdr108]

I don't think this is true. However, two friends of mine were recently denied mortgages because valuations have become unsustainable and too high. So while they were prepared to pay, say $350 000 for a condo, the bank would only value it at $310 000 and mortgage for $260 000, leaving them on the hook for a 25%dp, which they couldn't afford. This might be what you're hearing about.

honestly, if they or anyone else could not afford to put 25% dp, then they shouldn't be buying.

that should have been the case always; however, FIs were almost giving away the mortgages and the same faulty premise world-wide of never ending appreciation.

 

[MadMax]

I don't think this is true. However, two friends of mine were recently denied mortgages because valuations have become unsustainable and too high. So while they were prepared to pay, say $350 000 for a condo, the bank would only value it at $310 000 and mortgage for $260 000, leaving them on the hook for a 25%dp, which they couldn't afford. This might be what you're hearing about.

Well it's good to know that the banks are prudent in this way....I guess this is just one of the reasons Canadian Banks were voted tops in the world! Our banks make wise decisions based on logic while other countries who got caught, gave anyone and everyone a mortgage indiscrimanetly...

 

[taal]

Well it's good to know that the banks are prudent in this way....I guess this is just one of the reasons Canadian Banks were voted tops in the world! Our banks make wise decisions based on logic while other countries who got caught, gave anyone and everyone a mortgage indiscrimanetly...

Whether that is true or not it is not for the reasons you state.

The bank is in many cases willing to give out mortgages with only 5% down payment - it seems the issue here lies with value of the unit.

But if that was the case, what would have happened was the bank would have approved them for whatever value and when they did the assessment on the unit they'd regret it.

While I agree stronger limits should be in place I think whatever the limit for not needing insurance on the mortgage should be adequate - which in most cases is 20% (25% sometimes applies if it's one of many investment properties held by a particular buyer). This of course is on top of a good cash flow (income to sustain the monthly payments).

 

[Torontotony]

I read that it is harder to obtain a mortgage for a small condo (less 600sq ft). Is that true?

Yes, this is 100% true. Some banks do place limitations on minimum square footage. This has nothing to do with the property value, or the buyer's ability to qualify for a mortgage, or the amount of downpayment available. It has everything to do with the bank's perceived "saleability" of some of these smaller bachelor type units. Your banker, mortgage professional, or CMHC can assist you in determining these minimum standards.