Standard financing is usually considered when borrowers are acquiring a new property or refinancing an existing one and want longer-term financing with predictable payments. Properties with stable cash flow and consistent operating histories are favourable candidates for standard financing.
Standard Financing offers a term of five years or more, a fixed interest rate and is typically closed to prepayment for the term’s duration. For multi-family, the two types of standard financing are CMHC-insured and conventional.
CMHC-insured financing offers lower interest rates, terms of 5 years or more and higher loan to value ratios, making it the most popular choice for most borrowers. There are also programs available to borrowers (i.e. the Energy Efficiency Program) that can help them increase their loan amounts, access premium credits and lower their monthly expenses.
First National is Canada’s largest CMHC-insured lender.
Conventional financing is an excellent option, especially when CMHC-insured financing is not possible as a result of market leading purchase price, borrowers being unable to meet CMHC’s personal guarantee requirements or if a commercial component (retail or office) disqualifies the property from CMHC insurance. The typical term for conventional financing is five years, however seven and 10-year terms can be available.
Commercial Mortgage Backed Securities (CMBS): CMBS is a conventional financing solution available for first mortgages on established, stabilized properties (generally three or more years of stable operating history). This type of financing works well for properties with in-place, stabilized net cash flow.