Big Five Banks Unwilling to Give Mortgages for Micro Condos

What are Micro Condos?

Many developers are building what has been referred to as “micro condos”.  These are condominium units that are less than 400 square feet.  These micro condos have seen success in over populated areas such as Tokyo and New York, and are beginning to come to urban centres such as Toronto and Vancouver. 

Many people are surprised to find out that the big banks are often unwilling to provide financing for these micro condos.  This has led to purchasers, realtors and developers being frustrated and confused. 

“There are certain Canadian banks that won’t fund condominiums below a certain size but there are a lot of B-lenders that will and so the biggest mistake that the A-lenders are making is not funding those,” Brad Lamb of Brad J. Lamb Realty told , Canadian Real Estate Wealth. “They don’t actually know what they are doing.”

According to Mr. Lamb “They are greatly mistaken and poorly informed of where they should be putting their money,” he explains. “The funny thing is that they are prepared to lend money on the products that take the longest to sell and hardest to sell, yet the properties that rent instantaneously and sell instantaneously are the ones that the most people can afford.”micro condo

Lamb says the demand for micro-condos is “unlimited” in downtown urban centres, with young professionals craving these compact spaces.

So what does that mean for you?

Whether you are thinking of purchasing one of these units as an investment or to live in, in order to avoid any unexpected surprises, make sure you speak to a mortgage professional in order to ensure that you will be able to secure financing. 

While you can still get private financing or a B lender, it may not come with the interest rates or conditions that you would have gotten had you received a mortgage from one of the Big Five banks. 

Always make sure you make your offer is conditional on financing in order to avoid surprises. 

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