When should an apartment owner contemplate borrowing from a mortgage investment corporation?

There are a number of different ways to finance an apartment building today. The most popular product is still through the Canada Mortgage and Housing Corp. (CMHC), followed by institutional financing and private lenders. However, there is another source growing in popularity – a mortgage investment corporation (MIC). MIC is an investment and lending vehicle designed specifically for mortgage lending on residential and commercial properties in Canada.

Institutional lenders are facing increasing regulations imposed by the federal government for conventional and CMHC financing. The approval and funding process is becoming longer and more tedious for all parties involved. A MIC may facilitate a quicker approval and closing than traditional financing.

Apartment building borrowers typically use MIC financing when purchasing buildings that require repositioning. These bridge loan facilities are flexible short-term solutions and popular when a borrower needs time and money to stabilize a property. Once the property is fully occupied, improved and stabilized, the MIC loan can be paid out and replaced with long-term financing.

Rates for MIC financing are very competitive and can range from prime plus 2.5 to 3.5 per cent for first mortgages. Second mortgages are also available at high rates.

Peter Cook and Robert Fleet are apartment finance specialists with First National Financial LP.