Can someone get a mortgage for higher than the purchase price?

Question

My sister wants to get a mortgage. At the closing she needs to pay down debt. Can the mortgage company for example give 250k and the home only costs say 220..then the other 30k pay off credit cards at closing? Thanks

Answer 1

The short answer is "NO", not legally, without fibbing.

However there are many ways this has be done and can be done, none of which are entirely above board.

The Laws of the land prohibit financial institutions to finance more than the value or the sale price (whichever is lower) of a property and are guided by Canadian mortgage laws.

If your sister is able to get the mortgage for the full value of the purchase, she is already getting a lot of financing with a high personal debt, somehow I think the financial institution is already creating a bit of a creative situation.

One solution could be that if the property has the potential to be easily improved (add value) then at some time in the near future, one could possibly do a new appraissal and see if the financial institution would grant a different mortgage, based onthe now new value of the property.


CMHC now has a program where they will allow improvements to be taken into consideration in the initial financing.

For example, you buy a house, in need of updating and upgrades. with your mortgage application you include a set of plans for the upgrades with quotes from licensed contractors to perform the work, and an appraissal for the property value as if the work is completed, and CMHC will then consider including the cost of the improvements into the mortgage financing. they charge a hefty insurance premium , but it can work for some situations.

My advise to your sister, cut up the credit card, pay of her credit card debt, save some real money and live within her means. The sooner she pays of the credit cards, the sooner she can save upwards to $ 300 - 500 per month, without making any difference in her cash-flow, just by not having to pay towards a bad debt (any debt not putting money in your pocket is a bad debt).

the biggest problem we see with people and credit card debt is they roll their high interest rate debt into a mortgage, thinking this solves the problem, but it does not, it just moved it for a little while, because the spending has not changed, before long the now fully accessable credit card will be charged up to the max and now there may not be enough equity in the house to lower the monthly bills.

If you take a quick look at what is happening in the USA, there are many many people in real financial problems, because they have used one or more of these equity take out loans to reduce credit card debt, but now that the real estate prices are stalling and in many areas are dropping, banks are starting foreclosures left right and centre, because people don't have any equity left, and in many cases are so far over their head the literaly are walking away from their homes, with nothing left, not even their cars or fancy stuff, because it was all paid for with credit.

OK did I scare you now. good, smart real estate investing starts with smart money strategies. Which start by living within your means, then buyng real estate with the right things wrong to it. so that you can easily add value to it, and move on. do this 5 times over a 10 year period and you should either be mortgage free or have a 4 to 5 property portfolio that will make you financial independent for the rest of your life

Answer 2

Short answer, no.

For purchase transaction loans, lenders will generally loan up to 103% of the purchase price (purchase prices can be inflated with credits given at closing for recurring & non-recurring closing costs). Mortgage lenders will not loan beyond what the collateral is worth (i.e. in the scenrio you described above, if the house burned down the lender would be out $30k--why would they risk that?). Lenders will also insist upon there being no cash to the borrower at closing (so no, the funds can't be used to pay off other debts). If you find a mortgage broker that tells you otherwise, RUN! The last thing you want to do is get involved with a fraudulent loan from a shady mortgage broker.

Answer 3

The mortages which will habe the superb expenditures of pastime and could forestall the main money are short term loans. 5, 7, 10 and 15 3 hundred and sixty 5 days mortages are extra effectual. E once you seem on the completed quantity paid over the existence of the indoors maximum loan back the fast term are the superb. as an occasion on a 30 3 hundred and sixty 5 days mortage you will pay back approximately 3 a million/2 circumstances the fee of the domicile. On a fifteen 3 hundred and sixty 5 days loan you will pay back approximately 2 circumstances the fee. you may get much extra effectual in case you elect a 5/a million or 7/a million. those are short term with a baloon charge on the tip.. in case you attempt to maintain your charge to the backside achievable then decide for the 30+ 3 hundred and sixty 5 days mortage, whether that is going to fee extra in the long-term. i've got no longer reported something approximately pastime. That comes from 2 issues, your credit and the indoors maximum loan form.

Answer 4

It's called a second mortgage.

Answer 5

yes they may roll it all into one.