Raise the Hammer

The new federal rules on residential mortgages take effect today. The maximum mortgage amount a Canadian home buyer can get is 80% of the value of the home and he or she must make the remaining 20% down payment. http://business.financialpost.com/2012/0...

Today, Hamilton city council voted without discussion to loan and grant Vrancor 27.3% of the estimated value of its $36 Million Homewood Suites project. Is the remaining 72.7% of the value of the project is being financed through a commercial mortgage? Or is Vrancor actually paying some money up front on its Homewood Suites project? The city staff report is silent on this point. http://www.hamilton.ca/NR/rdonlyres/F525...

While the appearance of momentum in Hamilton downtown residential development is necessary and welcomed, one hopes that Vrancor’s financing of its Homewood Suites development is not the equivalent of Leon’s “don’t pay a cent event”.

Comment edited by RenaissanceWatcher on 2012-07-09 18:56:14

The new federal rules on residential mortgages take effect today. The maximum mortgage amount a Canadian home buyer can get is 80% of the value of the home and he or she must make the remaining 20% down payment.

Don't confuse a mortgage with a home equity loan - they're different things. The rule change applies to people who are already home owners, who are taking out a loan against the value of their property - previously they could get up to 85% of that value.

The change in the maximum amortization period is what will affect new buyers. (EDIT - though there is still flexibility for longer amortization if a 20% down-payment is made... this article has more details on all the changes: http://business.financialpost.com/2012/0... )

But I agree, hopefully Vranich's financing is strong.

Comment edited by ScreamingViking on 2012-07-09 19:31:49

The essence of my post was that Hamilton taxpayers, who must now put down 20% if they want to purchase a home, have granted/loaned Vrancor almost $10 Million without even knowing how much Vrancor is actually contributing to the Homewood Suites project.

Comment edited by RenaissanceWatcher on 2012-07-09 20:58:59

There is a definite incongruity there.

I was just trying to clarify the terms of the changes the federal government has instituted. The 20% rule doesn't apply to mortgages under $1 million, just the amortization period change applies. (the second FP article also linked to the feds' statement, which is in some ways a bit clearer than many news stories are stating: http://business.financialpost.com/2012/0... )

Now, I would think it's possible Vranich has leveraged his other properties to gain financing for this development, which is directly comparable to the new rules on residents using their home equity to get a loan.

Comment edited by ScreamingViking on 2012-07-09 21:49:40

“Projects like this say something about the redevelopment of downtown.” - Neil Everson

According to the article provided by ScreamingViking, only required to put down minimum of 20% on homes valued $1m or more.

The “essence of the essence” of my original post is that Hamilton taxpayers have not been informed as to whether Vrancor is actually contributing any of its own capital to its own Homewood Suites project.

Given that the home mortgage analogy in my original post seems to have drawn more of a response than the observation about the non-disclosure of the Vrancor Homewood Suites financing, I will close by offering some clarification on the 20% down payment rule. The only way that a buyer of any home (over or under $1 Million in value) is permitted to pay less than a 20% down payment and obtain a mortgage from a bank greater than 80% of the value of the home is where the home buyer purchases thousands of dollars worth of CHMC insurance. The following excerpt is from the Canada Mortgage and Housing Corporation website:

“The Canadian Bank Act prohibits most federally regulated financial institutions from providing mortgages without mortgage loan insurance for amounts that exceed more than 80% of the value of the home or purchases with less than 20% down payment.”

http://www.cmhc.ca/en/co/moloin/moloin_0...

True, but it's tacked on to the amount of your mortgage, so it's not a large hurdle, and on any given day a number of people buy with less than 20% down.

Joey Coleman’s blog reports that, on July 12, 2012, Hamilton city council, again without any discussion or questions, ratified the decision it made at its GIC Meeting on July 9, 2012 to grant/loan approximately $9.7 Million to Vrancor for its $36 Million Homewood Suites condo/hotel development. http://www.joeycoleman.ca/2012/07/city-c...

Meanwhile, there is some breaking news ahead of the Special GIC Meeting on HECFI scheduled tomorrow morning. Andrew Dreschel of the Hamilton Spectator reports that the AEG/Katz Group has withdrawn its bid while local entrepreneur Sonic Unyon is now partnering with the SMG/Forum Equity bid. http://www.thespec.com/news/local/articl...

Comment edited by RenaissanceWatcher on 2012-07-17 20:30:58

At the Special GIC Meeting on HECFI today, the Carmen's group proposed the construction of a 44 storey hotel/condo development in downtown Hamilton within three to five years if it wins the management contract for the Hamilton Convention Centre: http://www.thespec.com/news/local/articl...