Common Mistakes Investors Make When Pursuing CMHC Financing
Josh Perez • August 21, 2024
When it comes to navigating the complexities of CMHC (Canada Mortgage and Housing Corporation) financing, one of the key strategies that can offer significant benefits is the partnership approach. By pooling resources and partnering with individuals whose strengths complement each other, investors can often access larger assets that yield better returns. However, this approach, while advantageous, can also lead to certain pitfalls if not executed properly.
"Combining resources and people that complement each other in a project can often help you get into some larger assets that provide better returns."
The Importance of a Complete Partnership
One of the most common mistakes we see involves the boots-on-the-ground or active partners not fully completing their partnership roles during the offer process. These active partners may excel at finding and sourcing deals but might not bring the necessary capital, liquidity, or net worth to the table. When these crucial financial components are missing or underdeveloped, it becomes challenging to present a comprehensive financing package to secure a letter of interest or a discussion paper from the lender.
This incomplete partnership can cause several issues:
- Deals Falling Apart: Without a strong, complete partnership, deals can crumble during the negotiation phase because the investors are uncertain about financing terms or closing dates.
- Reduced Leverage in Negotiations: When the financial picture isn’t fully secured, investors may have less leverage in negotiations, leading to less favorable terms.
- Delays in Application Processing: If all investors and necessary resources aren't in place early on, the application process can be delayed, causing setbacks in the overall project timeline.
Proactive Solutions for Investors
To avoid these common mistakes, I often recommend that investors involve potential partners early in the process. Bringing all potential investors into the conversation early on allows us to present a full picture to the lender when we reach the offer stage. Here’s how you can ensure a smooth CMHC financing process:
- Early Involvement of Investors: Invite your potential investors to join a call where we can discuss sample deals and outline what a successful investment might look like. This early involvement ensures that everyone is on the same page and that we can begin intake as soon as possible.
- Present a Unified Front to Lenders: By having all partners and their resources ready to go, we can present a cohesive and strong financing package to lenders, which increases the likelihood of securing favorable terms.
- Streamline the Offer Process: With all parties involved from the start, we can expedite the application process and hit key milestones more efficiently, reducing the risk of delays.
By taking these proactive steps, investors can mitigate the risks associated with incomplete partnerships and improve their chances of success in securing CMHC financing. Remember, the key is to ensure that all aspects of the partnership are fully developed and aligned before entering the offer process.
If you have any questions or need further guidance on CMHC financing, feel free to reach out. We're here to help you navigate the complexities and maximize your investment opportunities.
One of the benefits of working with an independent mortgage professional is having lots of great financing options! Rather than dealing with a single lender with one set of products, independent mortgage professionals work with multiple lenders who offer a wide selection of mortgage financing options that provide more choice. Increased choice in mortgage products is beneficial when your situation isn’t “normal,” or you don’t quite fit the profile of a standard buyer. Purchasing a new construction home through an assignment contract would be a great example of this. Purchasing a new construction home through an assignment contract can be tricky as not every lender wants the added perceived risk of dealing with this type of transaction. Most of these lenders won’t come out and say it; instead, they add a significant list of qualifying conditions to make the process harder. The good news is, there are lenders available exclusively through the broker channel that have favourable policies for assignment purchases. Here are some of the highlights: All standard purchase qualifications apply, including applicable income verification, established credit, and required downpayment Assignments can be at the original purchase price or current market value Minimum 620 beacon score with no previous bankruptcies or consumer proposals The full downpayment must come from the purchaser and not include any incentives from the seller. As far as documentation goes, the lender will want to see the original purchase agreement signed by all parties, the MLS listing, the assignment agreement signed by the builder, the original purchaser, and the new buyer. The lender will also want to see the side agreement between the original purchaser and the new buyer, including the amended purchase price. The lender will want to substantiate the value through a full appraisal. Now, as every situation is different, this list of conditions is in no way exhaustive but meant to show that assigning a new construction purchase contract is doable while highlighting some of the terms necessary to secure financing. If you’re looking to purchase new construction through an assignment contract, or if you’d like to discuss purchasing a home through traditional means, please connect anytime! It would be a pleasure to outline the mortgage products on the market that won’t limit your financing options!
Bank of Canada holds policy rate at 2¾%. FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario June 4, 2025 The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. Since the April Monetary Policy Report, the US administration has continued to increase and decrease various tariffs. China and the United States have stepped back from extremely high tariffs and bilateral trade negotiations have begun with a number of countries. However, the outcomes of these negotiations are highly uncertain, tariff rates are well above their levels at the beginning of 2025, and new trade actions are still being threatened. Uncertainty remains high. While the global economy has shown resilience in recent months, this partly reflects a temporary surge in activity to get ahead of tariffs. In the United States, domestic demand remained relatively strong but higher imports pulled down first-quarter GDP. US inflation has ticked down but remains above 2%, with the price effects of tariffs still to come. In Europe, economic growth has been supported by exports, while defence spending is set to increase. China’s economy has slowed as the effects of past fiscal support fade. More recently, high tariffs have begun to curtail Chinese exports to the US. Since the financial market turmoil in April, risk assets have largely recovered and volatility has diminished, although markets remain sensitive to US policy announcements. Oil prices have fluctuated but remain close to their levels at the time of the April MPR. In Canada, economic growth in the first quarter came in at 2.2%, slightly stronger than the Bank had forecast, while the composition of GDP growth was largely as expected. The pull-forward of exports to the United States and inventory accumulation boosted activity, with final domestic demand roughly flat. Strong spending on machinery and equipment held up growth in business investment by more than expected. Consumption slowed from its very strong fourth-quarter pace, but continued to grow despite a large drop in consumer confidence. Housing activity was down, driven by a sharp contraction in resales. Government spending also declined. The labour market has weakened, particularly in trade-intensive sectors, and unemployment has risen to 6.9%. The economy is expected to be considerably weaker in the second quarter, with the strength in exports and inventories reversing and final domestic demand remaining subdued. CPI inflation eased to 1.7% in April, as the elimination of the federal consumer carbon tax reduced inflation by 0.6 percentage points. Excluding taxes, inflation rose 2.3% in April, slightly stronger than the Bank had expected. The Bank’s preferred measures of core inflation, as well as other measures of underlying inflation, moved up. Recent surveys indicate that households continue to expect that tariffs will raise prices and many businesses say they intend to pass on the costs of higher tariffs. The Bank will be watching all these indicators closely to gauge how inflationary pressures are evolving. With uncertainty about US tariffs still high, the Canadian economy softer but not sharply weaker, and some unexpected firmness in recent inflation data, Governing Council decided to hold the policy rate as we gain more information on US trade policy and its impacts. We will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Governing Council is proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy. These include: the extent to which higher US tariffs reduce demand for Canadian exports; how much this spills over into business investment, employment and household spending; how much and how quickly cost increases are passed on to consumer prices; and how inflation expectations evolve. We are focused on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. We will support economic growth while ensuring inflation remains well controlled. Information note The next scheduled date for announcing the overnight rate target is July 30, 2025. The Bank will publish its next MPR at the same time.
