4 Tips for a Mortgage in a Company Name

If you have a borrower who needs a mortgage in a company name, there are some challenges that may present themselves.

We often assume that commercial properties are the only properties that need a mortgage in a company name.  In fact, it is not unusual for residential properties to also be held in corporate names.

While there are some difficulties with this at times, it is definitely not a deal breaker.

Here are 4 tips for when you’re working with a corporate buyer:

1. Is the company is just a holding company or if it is an operating company?  In other words, is it a company with employees, GST remittances, etc.?  As lenders, a holding company is preferred so that it is free from all of the liabilities like GST and source deductions.

2. Guarantors will almost always be required. Lenders will likely want the personal guarantees of the principals of the company.  In general, lenders perceive more risk in this type of lending. The additional security will almost always be required.

3. Is the company current and has it filed all of its annual reports? The lender will likely want proof that the company has not been struck from the register for failing to file their annual reports before the mortgage is in the company’s name. The borrower should be able to provide this.

4. Be prepared for extra costs and time. Legal fees are typically higher for mortgages in company names. This is because the lawyers have to do more work and the package of documents is larger than with a simple residential mortgage.  Likewise, the timeline will be longer for both the lender and lawyers because of the increased number of steps.

Bringing these points up with your client early in the process will help set the expectations.  It will also make for a smoother and less frustrating closing when mortgaging properties in a company name.