One Lender, Half A Mortgage

As a rule, lenders don’t generally lend on just a half interest on a mortgage.  But as we know, rules are made to be broken.

Now for the most part lenders have good reason to not want to lend on half a mortgage.  And that reason is that lenders don’t want to lend on half a mortgage because they want to be able to foreclose on and sell the whole property.

If they take only a half interest as security, that means they are only able to sell half at the end of a foreclosure.  Or worse, they end up as a co-owner of the property with the other person on title.  Which is why they often will not lend on a half interest.

But like a lot of things, there are some exceptions to this:

• Some private lenders will lend on these in situations where they know the property will be sold at the end of a divorce. And where one of the parties just needs funds to pay the lawyers and other related expenses.  In other words, at the end, there is a clear exit for the lender.
• Another exception is where a property is being taken as additional collateral. For example, if one of the two people on title wants to buy another property in their own name and the LTV is slightly too high.  The lender may then be willing to register a new mortgage over the new purchase property.  The new mortgage will then blanket over the ½ interest in the original property.

So, as a broker, what do you do if you happen to be presented with a half interest mortgage request?  The best advice is to call around to all of your MIC and private lending partners.  They will have the best advice to help your clients in these situations.