What is bridge financing and how does it work?

In the simplest terms, bridge financing is a short-term lending option that helps homebuyers bridge the gap between their old and new homes. It is often a short-term solution for the buyer in order for them to arrange the mortgage for their new purchase.  

Recently, conventional banks have released guidelines, which make it increasingly hard to qualify for a bridge loan.  

The advantages of bridge financing are that you can get the funds you need before your home sells. This can give you the ability to purchase a new home and have some liquid money before your sale closes. The bridge may also give you some money to do some touch-ups or renovations to your home before listing for sale. See our blog on home renovations and increasing your property’s sale price before listing by visiting our blog: https://www.tembofinancial.com/2020/03/03/5-ways-to-increase-your-home-value-before-listing-for-sale/ 

How does it work? 

At Tembo Financial bridge loans are offered to clients without a lengthy list of criteria. We are able to assist clients with the funds that they need to bridge the gap between their purchase and their sale. Bridge financing works by putting a mortgage on your current property and sometimes your new property also, and only pay us back once your property has sold and closed! With flexible payment structures available, you may not have to make any monthly payments! 

 Need more of an explanation? See the example below:  

You are currently a homeowner at 12 Oneway Avenue and have just accepted an unconditional offer from a buyer for your current property, which has a closing date of September 18th. The purchase price was $700,000.00, and after paying off your mortgage, closing costs, and other costs such as moving or renovations, your net proceeds will be approximately $300,000.00. 

You’ve already placed an offer on a new property at 32 Ridgeway Crescent for $500,000.00, which is accepted, and your new property’s closing date is August 29th, 20 days before the closing date of your existing home

On your purchase, you’ve made a $25,000.00 (5%) deposit, and have decided to use $300,000.00 of your net proceeds from your sale towards your purchase. You’ll need that $300,000.00 on your closing date (August 29th), however, you won’t receive the proceeds from your sale until September 18th. What do you do?  

This is where bridge financing would be used, as you would take out a short term $300,000.00 loan for the 20 interim days between your purchase closing (August 29th) and your sale closing (September 20th). Although this situation is quite common, as exact closing dates aren’t always possible, such financing can be difficult to obtain from a bank, especially if the gap is greater than 30 days. 

Getting a loan for a house deposit

Getting a loan for a deposit on a new home is very common. The equity or savings that many people do have for a deposit is tied up in their current home. Luckily, there is an option for you to get a loan and put a deposit on a new purchase before selling your current home. 

Tembo Financial offers deposit loans to clients looking to sell, but wanting their deposit money sooner. The way that they can do this is by confirming that their home will be sold in the next few months, and with just a few documents, Tembo Financial can release funds.  

Best of all this loan often requires no monthly payments and no credit checks! 

In uncertain times, when you aren’t sure when your home will sell, don’t worry about not having money in your pocket. Tembo Financial is able to release your funds when you need them the most.  

COVID-19 is changing the game

The disease that started off as a regional Chinese health challenge has now become an international economic concern that is spreading unease and uncertainty.

Tembo gave a brief outline of the disease’s situation and status in its last blog and newsletter but the situation is rapidly changing by the day. In Italy, the number of cases and deaths is beginning to pick up and the government has declared a nation-wide quarantine affecting many millions of people. Initially the Italians quarantined a few northern regions, particularly the region of Lombardy – home to Italy’s major stock market, key industrial assets, and economic hub. That quarantine is now being covered to a greater number of regions. The Italian Prime Minister cautioned all Italians to be mindful of the risks of the disease and to stay at home and indoors if possible. In Iran, the rate of new cases and deaths is rapidly picking up, while the signs from China is not all gloom and doom, with some calm reemerging and President Xi visiting Wuhan – the epicentre of the disease.

The economic uncertainty created by the disease is being intensified by the massive fall in oil prices – the biggest in 30 years. Russia and Saudi Arabia could not come to a conclusion on oil supply output. Both OPEC, and OPEC+ failed to come to a consensus on oil supply to the market. Subsequently, oil prices have fallen rapidly and the Canadian economy and the Canadian dollar are being negatively affected. It is estimated that Canadian GDP falls by over $37 billion with every $15 drop in oil prices per barrel. Our economy is highly dependent on energy – and will remain so for many decades. Market demand for oil was falling well before the outbreak of the disease, and the uncertainty of the disease is itself weighing down on demand and dousing out consumer confidence. 

In North America itself, as well all know, the BOC (Bank of Canada), and the Federal Reserve cut their rates by 50 basis points last week. The BOC finally added some commentary to their decision, claiming that they weren’t worried about the real estate market overheating, and that the rate cut would boost consumer confidence. This week, we’ve seen markets around the world take big falls. In the U.S., the Dow fell by over 2,000 points on Monday. In France the CAC fell by over 10%. Tuesday saw a brief recovery but there is profound uncertainty about the long term trajectory of the market. The Bank of Canada has also said that it will not hesitate to cut rates further if the need arises. The Federal Reserve has not yet made such a claim but the President is calling for more stimulus, lower rates, and more proactive leadership from Fed Chair Jerome Powell. COVID-19 is changing the game and intensifying unease and fear around the world. 

The BOC & the Fed up the ante

Well it happened, the Bank of Canada took an emergency rate cut decision, we now have interest rates that are 50 basis points lower (0.50%) than where they were. The expectations for a rate cut were powerful. There was almost no expectation of a status-quo. Given that the Fed cut rates, the BOC (Bank of Canada) was forced to emulate.

The overall Canadian economy has been slowing, well before the outbreak of the coronavirus. GDP growth, job growth, and overall dynamism were well on the decline. In particular, the trade war with China was just one of the myriad problems which was weighing on the economy. The end result of this rate cut will be to see the real estate market gain added momentum. Media headlines of this have been firm. One story put it very bluntly by suggesting the rate cut decision would put ‘kerosene’ to the real estate sector. One way or another, the Bank’s are likely to all pass on the savings to consumers and mortgage holders given the competitive nature of the market. 

Federal Reserve Chair Jerome Powell took an aggressive turn in adding stimulus to the U.S. economy and mitigating the impacts of the coronavirus by cutting interest rates by 0.50%. The move was not unexpected, and was in many ways called for, but the scale of the cut is big and the forcefulness of the decision had a reactionary feel to it. The Fed’s build up to the cut was not as comprehensive and gradual as they have been in past years. Chair Powell’s press conference announcing the cut was poorly received by stakeholders, and some believed that he failed to inspire confidence in the broader economy. Strangely, market reaction to the cut was the opposite of traditional patterns. The selloff that was initiative by unease over the supply chain, tourism, and broader economic anxieties of the spreading virus intensified after the rate cut was announced. It’s likely that market participants felt that the cut was excessive and that the rationale behind it suggested a significant degree of unease over the economy.

In late February the Conference Board of Canada released a report in which they provided a snapshot for the next two years for every provincial economy. For Ontario, the report predicted challenges with trade, lower government spending as a percentage of the economy, and modest changes in wages, benefits, and income. However, the same report suggested that a broad based recovery in residential, commercial, and industrial construction would intensify this year and in 2021. A return of greater levels of foreign investment, lower interest rates, and continued employment growth were all cited as factors which would take the building sector to new highs. 


5 Ways to increase your home value before listing for sale

Are you planning on selling your home but looking to increase the value before listing?

Here are 5 tips that may help you!

  1. Painting– having a fresh paint job in your home can help you increase the value of your home. This is because the home will look clean, maintained and up to date to your buyer. This small touch up has the ability to increase your value and have more buyers interested.
  2. Staging– Staging the home helps buyers imagine what their future home can look like. With the right furniture and design, your buyer won’t have to imagine what the home will look like fully furnished, and will give them a warmer feeling of the home.
  3. Appliances– buyers love coming in to a home with new appliances. If your appliances are up to date, this can attract a buyer, and increase the value of the home!
  4. Landscaping– with the spring market coming up, it is important to maintain the look of the outside of your home. Having clean landscaping can attract your buyer to walking in to your home!
  5. Bathroom and Kitchen Renovations- having a freshly renovated bathroom and kitchen can attract your buyer. Making sure that your tiles and flooring are spotless in your bathroom is important to the image of your home. Adding new appliances and touch ups to your kitchen can also attract your buyer!

If you are planning to sell your home and would like to see if you can increase the value by doing renovations, contact Tembo Financial. Tembo Financial can advance you the funds that you need to renovate, and increase your sale value!

A Coronavirus Related Rate Cut?

News keeps building on the spread of the coronavirus around the world. South Korea has reported a thousand cases of the disease and over 50 deaths, with these numbers rapidly rising. The South Korean Government has responded by emulating the Chinese in quarantining whole cities.

Keep in mind that a little over a week ago South Korea’s coronavirus numbers were negligible. Cases of the virus have been reported across South Korea’s demilitarized border in the notoriously isolated North Korea – despite that country shutting down its borders, and even reportedly executing the infected. But the coronavirus is spreading well beyond East Asia. Iran is reporting a rapidly growing number of cases and deaths despite a negligible presence of the virus not long ago. Iran’s Minister of Health was recently seen delivering a press conference on the virus sweating profusely, coughing, and appearing weak – a sign of the severity of the outbreak, according to international media.

In Italy, the virus is rapidly spreading and prompting reported shortages of goods in stores and growing unease. These are the most high profile country cases of the global outbreak, with fear growing around the world, especially in Hong Kong, Taiwan, Japan, and Singapore. Over the last several days, media attention on the outbreak has become increasingly fearful and the apprehension has already hit international stock markets. U.S. markets are falling precipitously and experts are warning that the virus’ impact on international supply will be severe and widely felt. As we all know, China is the workshop of the world and the planet’s biggest exporter of goods ($2.5 trillion annually). Chinese companies are involved in the production processes of everything from steel to pharmaceuticals to computers to drones,. If Chinese factory output remains negatively affected by worker anxieties over the virus, global supply chains will be damaged.

In response to this intensifying and ongoing issue, financial experts and economists have already begun to call for the Federal Reserve to cut rates. The Wall Street Journal is following and reporting on the outbreak closely and featured an article where the rate cut argument was made. The front page of the paper ran a headline stating that the virus was beginning to take its toll on the global economy. The supply chain pressures experts are warning about have yet to be truly felt. The Federal Reserve is obviously monitoring the situation carefully and has not yet provided detailed comment on the virus outbreak. This goes for the BOC (Bank of Canada) as well. It is likely that if the severity of the virus continues to accelerate and if global markets continue to be negatively affected there could be a comprehensive international response – central banks acting in unison to stimulate the world economy. 

Bank Mortgage VS. Private mortgage

When arranging a mortgage for your home, you are faced with many options that may be confusing to you.

Tembo Financial offers solutions that can help you decide which is the best route to take.

Though there are several differences between a bank mortgage and a private mortgage, one of the biggest differences seen at Tembo Financial, is that the bank has certain qualifications, which you must fit in order to be considered for a loan. A private mortgage gives more flexible options and can suit different needs of clients.

Bank mortgages are offered to clients in which are currently employed, have a strong credit rating, and enough equity in their home.

Private mortgages however, have the ability to lend only based on the equity in the home, meaning it is possible for credit ratings to be lower, or for the borrower to be unemployed.

Tembo Financial is a private lender, that can offer flexible solutions to clients that don’t fit the tight mold of banks. Speak to one of our representatives today to see if a private mortgage is right for you!

Regulators are concerned about the real estate market – again

The activity we’re seeing the real estate market is raising red flags with federal regulators and the Bank of Canada. When the 2016-17′ boom reached its peak governments at all levels rapidly intervened to cool activity.

We all remember the introduction of the foreign buyers tax, tighter mortgage approvals, the mandating of mortgage insurance at certain levels, etc. These government interventions succeeded, eventually precipitating what was effectively a flat-lining of prices and a slowdown in demand. Once the shock subsided and the market adjusted, the recovery kicked in though, rendering the government action a grand delay. We’re now not far off from the 2016-17′ boom peak. The boom is back, and the apprehension is back with it.

Bank of Canada Governor Stephen Poloz summed up his opinion on the present status of the housing market with one word – “froth.” The BOC (Bank of Canada) notes that the rise is unsustainable and expects the market to naturally self-regulate if the rise in prices becomes excessive for prospective buyers. As always, the BOC is standing by to raise rates in the event that inflation and housing price growth becomes excessive. This is a worst-case scenario, and in many ways, softening national economic growth would spur the BOC to cut rates instead. The BOC will definitely monitor real estate stats closely in Q1 & Q2 2020 and will review its options if the housing momentum we’ve discussed intensifies. 

As for the provincial government in Queen’s Park, it is unlikely to interfere in the housing market in any way other than stimulating the growth in supply (cutting developmental approvals). The federal government is also limited in its capacity to address a hot market as it must balance affordability with controlling demand. A federal election is also soon on the horizon, which will see activity designed to increase supply and facilitate easier buying of housing, not the opposite. At the end of the day, if regulators and bureaucrats feel that the housing market is getting out of control they will move rapidly in concert with the BOC to add new measures, despite any political pressures. 

Galleria Mall is in the dustbin of history

The corner of Dufferin and Dupont is a working class, generally blue collar area not far from the mid-Toronto rail track. The area has always been busy, heavily transited, and Dufferin St. has continuously grown as a major north-south thoroughfare of the city.

The Dufferin bus route is one of the busiest in Toronto and use continues to grow. Two decades ago, houses in the area were extremely affordable and the neighbourhood was a major magnet for new immigrants while also being home to more established Italian, Portuguese, and Anglophone communities. Dufferin-Dupont was served locally by Galleria Mall, a 5 acre patch of retail and shopping locales. Galleria was built in the early 70s, and while regarded with affection by many locals, had a reputation as being run-down and outdated. The mall was a shadow of Dufferin Mall’s scale and shape just south of Bloor. Dufferin-Dupont’s close proximity to the Bloor subway line and the downtown and midtown cores and the Annex have benefited it greatly, and equity in homes in the area has soared, especially in the last 10-12 years. The gentrification of the area has been ongoing for some time, and young professional families have been moving in. But all of that is now intensifying.

Galleria Mall was bought in 2015 by Freed Developments and ELAD Canada, by September, ELAD took over total control of the site. The new owners spent years consulting the community and trudging through the regulatory, zoning, and approvals processes to have an ambitious and bold plan prepared. The derelict mall with considerable parking space will be transformed into a network of eight residential buildings with 3,400 housing units, 150 of which will be ‘affordable’,  considerable retail space and a redesigned and enlarged park space and community recreation centre. The new project will see 3.3 million square feet of space, up from the present 227K square feet. While the already significant congestion in the neighbourhood will only worsen, the project will likely spur further densification and gentrification in the area and will see many jobs and investment poured in. Galleria’s poor reputation and derelict condition at the time of the sale likely netted ELAD and Freed a good sale price. The area was once an aircraft manufacturing plant that was transformed into a car plant and then eventually retail and parking space. Construction of the project will take a decade to complete.


Buttonville Airport is going for sale!

Buttonville Airport is a privately owned, public airport just north of Markham. It covers over 170 acres of the primest of prime suburban 905 real estate. The airport is a half hour drive from downtown Toronto and is just east of Highway 404, Buttonville’s strategic proximity to the rapidly growing GTA and the massive growth in air traffic over the last several decades helped transform the site from a ‘grassy strip’ to the largest, most dynamic privately owned airport in the nation. 2018 saw the airport achieve just over 44K aircraft movements, down from over 80K in 2014. In comparison, the large publicly owned Billy Bishop Airport in downtown Toronto has aircraft movements over 125K. In 2009, the family who then owned the airport announced that they wanted to initiate a broad redevelopment of the site into a mixed use commercial, retail, and residential development. This was highlighted as a golden opportunity to unlock tremendous value for a huge tract of strategic real estate. The family sold in 2009, forming a ‘partnership’ with Cadillac, and the price has not been disclosed, but the value of the undeveloped acreage was believed to be worth between $100-150 million at the time.

Cadillac’s plan would have created 10 million square feet of overall multi-use space worth billions. In comparison, the total size of the Yorkdale Mall is just under 1.9 million square feet of retail space. 6-7K new residents would have been accommodated, generating tremendous property tax revenue for the City of Markham. At least a dozen mid and high rise towers were to be constructed. In all likelihood, the ambitious scale of Cadillac’s strategy would have made the airport family billionaires. However, the immense rezoning work required to approve the project was never completed. The deal was shifted off to the Ontario Municipal Board, but negotiations involved too many stakeholders and too much work. Delays kept pushing back the project. The uncertainty and complexity of the project proved too cumbersome for Cadillac and it appears the partnership have now agreed to wash their hands of the property and to put up the holdings for sale.

The sale will create opportunities but also challenges. Significant corporate jet traffic uses the airport and will have little room to transition to as Billy Bishop is limited in its traffic and Pearson is bursting at the seams. The sale will likely up pressure on the federal government and federal transportation regulators to finally and definitively approve construction of Pickering Airport. The GTA is growing to the extent that a second international airport will be necessary, barring that, Pearson will have to be rapidly expanded. Pickering Airport’s construction will intensify development in Durham Region, create many jobs, and spur additional construction, rezoning, and densification. The recently elected Mayor was strongly supportive of airport construction and won election with over 60% of the vote on a pro-build campaign.