Does anyone have experience with Umbrella Mortgages?

[Swish]

So I had something that came up that I had never heard of before this week. I used to bank with one of the big six in Canada and over a series of horrible service on their part they lost all our mortgages and when the final one was up for renewal they called to see what happened to all the other loans and why we moved them and then significantly beat the rate and saved the last one. Since then the person at the local branch who botched up all this business has left and I get a call from a guy who is a relationship manager last week. Basically he called because he wanted to "offer" me a preapproved unsecured LOC with no application or credit underwriting. I think  this was just his excuse to call because he spent the majority of the time trying to learn why they had lost so much of our business. After discussing my intended plans he suggested that we establish a operating LOC to smooth some of the bigger one time bills that hit each year because I keep using my spare cash to buy more properties as well as an Umbrella Mortgage for the corporation.

I had no idea what this was and basically he explained it as a single mortgage for all the properties instead of having 20+ individual ones. Then the one large mortgage has one interest registered against all the titles, one payment, one refinance when needed and overall simplifies the complexity of our finances substantially.

The biggest issue I see with a product like this is that if I want to refinance they will get to charge me an application fee of 1% on the total balance owing vs me refinancing one smaller property with either no fee or a much smaller one. They claim that if this is done less than every 5 years the fee is waived. The next biggest issue would be if I ever wanted to sell a property it is a bit of a mess to get it pulled out of the total. Adding more to it seemed pretty straight forward but for some reason the sale of a property requires a new mortgage to be applied for and registered against the titles.

I don't intend to sell any of the properties I am currently invested into but no one knows for sure what the future holds. The biggest temptation is how much simpler it sounds to just manage one financial instrument. All the properties are up for refinance in 3.5 years so he said he wants to meet again closer to that date so they have the chance to bid to get the business back.

Has anyone out there had experience using this or a similar product??? What were the pro's con's? Would you do it again?

Second has anyone found going back to a firm that lost your business previously worked out well?

   

[Babybalrog]

I think in America these are called Portfolio Loans.

May be wrong there, but in general this isn't that strange. One property or multiple, a loan is a loan and banks want asset(s) backing it up. The terms you described sound similar to what I've seen here.

As far as adding or removing, every bank will be different, but removing a property to sale is a perineal issue. I have heard of contracts that allowed a property to be removed as long as the remaining LTV is under 80%. Since that's usually the original LTV, it is only after some time and appreciation that that can happen.

It may be easier to manage one mortgage. Also, I don't know if the interest rate can be a little better since the asset is more diversified?

[Swish]

I think in America these are called Portfolio Loans.

May be wrong there, but in general this isn't that strange. One property or multiple, a loan is a loan and banks want asset(s) backing it up. The terms you described sound similar to what I've seen here.

As far as adding or removing, every bank will be different, but removing a property to sale is a perineal issue. I have heard of contracts that allowed a property to be removed as long as the remaining LTV is under 80%. Since that's usually the original LTV, it is only after some time and appreciation that that can happen.

It may be easier to manage one mortgage. Also, I don't know if the interest rate can be a little better since the asset is more diversified?

Thanks for the information definitely got me pointed in the right direction. I had never heard of the term before and as soon as I googled portfolio loans there was a ton of stuff!

[sammybiker]

I looked into this quite a bit several years ago, 2015-2017.  As @Babybalrog mentioned, Portfolio Loans is what we called them at the time (US based).

The smaller credit unions I ended up working with were not a huge fan of them, quoting it was easier to just perform individual loans vs the portfolio product, so that's what I ended up doing.

100% agreed, it would be way easier to just have one big payment to make, esp as the banks started selling my loans.

[belly05]

We have this exact type of loan on all of our properties, our local bank calls it a "blanket loan".  It has worked out really well for us, however we have run into pro's and cons.


Cons: Refinancing every 3 - 5 years.  Our bank requires that we refinance the entire portfolio every 3 - 5 years (our choice).  This can work in your favor when the rates go down, and it can work against you when rates go up.


Pro's: Its way more of the wild west than a traditional loan, many of the standard rules like 20% down payment's don't apply. We can also really easily play around with equity, as a couple examples.  If we want to purchase a new property, we can go to the banker and say: hey we like property X, our blanket loan is currently only at 45% Loan to Value, can we buy this new property with no money down and just roll it into our blanket loan (banker says sure).  Same goes when selling, we are selling a property right now that had 75k left on the mortgage - we asked banker if we could just have all of the sale price instead of paying off the 75k, banker says sure you LTV is currently at X% so were ok with that.

There are also some small pros in terms of accounting and easily tracking loan expenses, but to me the main value with this type of loan is the flexibility it offers us, it seems very dependent upon the bank and the individual banker you end up working with - these commercial bankers have a lot of leeway and description it seems like.

hope that info is helpful!

[ducky19]

We have this exact type of loan on all of our properties, our local bank calls it a "blanket loan".  It has worked out really well for us, however we have run into pro's and cons.


Cons: Refinancing every 3 - 5 years.  Our bank requires that we refinance the entire portfolio every 3 - 5 years (our choice).  This can work in your favor when the rates go down, and it can work against you when rates go up.


Pro's: Its way more of the wild west than a traditional loan, many of the standard rules like 20% down payment's don't apply. We can also really easily play around with equity, as a couple examples.  If we want to purchase a new property, we can go to the banker and say: hey we like property X, our blanket loan is currently only at 45% Loan to Value, can we buy this new property with no money down and just roll it into our blanket loan (banker says sure).  Same goes when selling, we are selling a property right now that had 75k left on the mortgage - we asked banker if we could just have all of the sale price instead of paying off the 75k, banker says sure you LTV is currently at X% so were ok with that.

There are also some small pros in terms of accounting and easily tracking loan expenses, but to me the main value with this type of loan is the flexibility it offers us, it seems very dependent upon the bank and the individual banker you end up working with - these commercial bankers have a lot of leeway and description it seems like.

hope that info is helpful!

Thanks for this. I started looking for portfolio loans, and it seems the definition is a loan that the lender doesn't sell - they keep it in their portfolio. Blanket loan is the term I've found to describe this as well.

We currently have two rentals - one that we own outright, and one that has a small ($28k) mortgage. We'd like to pick up a few more, and a blanket loan sounds like a good solution to being able to purchase with no money out of pocket. Is there a minimum number of houses your bank requires to have a blanket loan? I've seen some that say "at least five", but wasn't sure if that was the standard.