Vancouver Leasehold Properties: Leasehold Financing Basics

At Propel Real Estate Group, we understand that Vancouver’s property market can be as exciting as it is complex. Today, we’re shedding light on an intriguing aspect that might not be as well-known to the general public: leasehold financing.

1. The 95% Financing Myth

Let’s address the elephant in the room: Yes, it’s true. Some lenders will finance up to an impressive 95% of a leasehold property’s value. You might be thinking, “Wait, don’t most major banks ask for at least a 20% down payment?” You’re right! The big 5 banks typically do require that. However, there are wholesale lenders out there that are open to arrangements with just a 5% down-payment. This can be an enticing avenue for those looking to get into the market with a smaller initial investment.

2. Key Factors in Leasehold Financing

If you’re considering this financing route, there are some crucial points you’ll want to keep in mind:

  • Lease Duration: There should be a reasonable time remaining on the lease. For instance, if you’re looking at a 25-year mortgage amortization, the lease should have at least 30 years left on it.
  • Mortgage Insurance: Your mortgage will need to be insured.
  • Type of Lease: Only properties with leases from Provincial, Municipal bodies, SFU, or UBC are eligible for this kind of financing.

3. Think Long-Term

When considering a leasehold property, it’s essential to reflect on factors like age, financial situation, and the property’s intended purpose. This is particularly true for elderly homeowners who view their home as a retirement safety net. With the growing popularity of “reverse-mortgage” products, they can withdraw their property’s built-up equity, either as a lump-sum payment or a monthly allowance. This is a boon for those looking to supplement their retirement income. However, there’s a catch: leasehold properties aren’t eligible for reverse mortgages if less than 75 years remain on the head lease or if the property is on First-nations land.

In Conclusion

Leasehold properties offer unique opportunities and challenges in Vancouver’s bustling real estate market. Knowledge is power, and understanding the intricacies of leasehold financing can be your ticket to making informed and profitable decisions.

If you have any questions or need more clarity on financing leasehold properties, please don’t hesitate to reach out to us at Propel Real Estate Group. Your dreams and aspirations in real estate are our priority.

Thank you for staying with us on this insightful journey!

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Propel Real Estate Group