# Loan To Value



## vi123 (Oct 29, 2015)

Hi everyone,

We just bought a place in Victoria. The price was 2.4m and RBC has offered us a LTV of 65% (i.e. 35% downpayment). 

We'd like to make a smaller downpayment than this if possible. We have assets elsewhere that we don't want to sell. Our credit is great and we could easily pay cash for the house if we moved our money around, but we want to keep as much financial flexibility as possible.

So my question is.. are we likely to get a higher LTV with another bank or credit union? Should I shop around a bit?


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## birdman (Feb 12, 2013)

The only way to find out is to shop around. It is often the case that a higher down payment is required for more expensive homes. I would talk to a credit union and perhaps a broker and see what they have to say.


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## andrewf (Mar 1, 2010)

I think talking to a broker is likely your best bet.


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## Mortgage u/w (Feb 6, 2014)

$1.56m mortgage is one hefty mortgage. Did they mention why max 65% LTV? You're best bet at obtaining more financing is to talk to the financial institution where you hold the majority of your assets. Max would be 80% anywhere you go - if your looking for a HELOC, then 65% makes sense as the max.

A broker can help but I can't see many mono-line lenders approving that high of a mortgage.


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## vi123 (Oct 29, 2015)

Mortgage u/w said:


> $1.56m mortgage is one hefty mortgage. Did they mention why max 65% LTV? You're best bet at obtaining more financing is to talk to the financial institution where you hold the majority of your assets. Max would be 80% anywhere you go - if your looking for a HELOC, then 65% makes sense as the max.
> 
> A broker can help but I can't see many mono-line lenders approving that high of a mortgage.


We bank with RBC and have very little debt. In fact, if we cashed out our RBC Direct Investing account we could pay cash for this property. They can see that in their system, but it seems to count for nothing.

That's why I was so shocked. We don't *need* a high LTV, but we *want* a high LTV because we have our money invested elsewhere and very little outstanding debt.


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## andrewf (Mar 1, 2010)

Okay, get a 65% LTV loan on your home, then borrow the rest as a margin loan against your DI account. I'm not sure why you are so keen to lever up with non-deductible debt. Why not pay cash for house and borrow to invest?


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## Just a Guy (Mar 27, 2012)

The "reason" (excuse) I've heard is, despite having assets in stocks, stocks are volatile and thus not secure. Banks don't like dealing with anything other than a sure thing, thus they always offer you money when you don't want it and make it hard when you actually do need money.


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## vi123 (Oct 29, 2015)

Well RBC just lost a big chunk of mortgage business. The next two institutions we spoke to (a credit union and a local bank) both offered us 80% LTV. There's something completely wrong with RBC's risk evaluation if they don't want to fight for our business.


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## vi123 (Oct 29, 2015)

andrewf said:


> Okay, get a 65% LTV loan on your home, then borrow the rest as a margin loan against your DI account. I'm not sure why you are so keen to lever up with non-deductible debt. Why not pay cash for house and borrow to invest?



There are a few reasons why what you suggest is a bad idea.
1. Margin interest rates are higher than mortgage rates.
2. A margin loan is much more likely to get called than a mortgage or even a HELOC.
3. We are using a mortgage/HELOC combination so most of our interest will, in fact, be tax deductible.


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## Just a Guy (Mar 27, 2012)

Banks aren't all that worried about "retention" from what I've seen. Many are inspired about "acquisition" though, I believe most banks have employee rewards for bringing in new clients, so they tend to be more flexible.

I've tried for years to consolidate all my banking into one place, but it just doesn't work, they don't care. So, generally, I set up one account, at one bank, to hold all the money, then go to the bank that gives me the best of whatever I'm looking for (usually mortgages). They can all take money out of the one account, so really what does it matter who holds the product.

I don't understand why people get all emotional about one bank and it loyalty or lack thereof. Banks are a business, your finances are a business and should be treated as such. Emotions just get in the way and cause unnecessary stress.


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## Mortgage u/w (Feb 6, 2014)

vi123 said:


> We bank with RBC and have very little debt. In fact, if we cashed out our RBC Direct Investing account we could pay cash for this property. They can see that in their system, but it seems to count for nothing.
> 
> That's why I was so shocked. We don't *need* a high LTV, but we *want* a high LTV because we have our money invested elsewhere and very little outstanding debt.


A Branch is only as good as their employees and Director managing them. You may have fallen upon a Manager who is a little "up-tight" or doesn't understand credit risk too well. Try changing RBC branch. I'm certain you will get a different response.


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## andrewf (Mar 1, 2010)

vi123 said:


> There are a few reasons why what you suggest is a bad idea.
> 1. Margin interest rates are higher than mortgage rates.
> 2. A margin loan is much more likely to get called than a mortgage or even a HELOC.
> 3. We are using a mortgage/HELOC combination so most of our interest will, in fact, be tax deductible.


1. Yes. It is riskier.
2. You are asking for the bank lend you more on the basis of these assets. Margin loans are unlikely to be called at 20% loan/value which you are suggesting you would have.
3. This is a non-sequitur. The type of loan does not make it tax deductible. Only to purpose to which the loan funds are used.


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## twa2w (Mar 5, 2016)

I find this surprising about RBC. Most banks, including RBC, have lending policies where they ( excluding insured loans) will lend up to say 80% of the first 1,000,000 or so, then a lower % say 65% on the remainder. Some have several tiers.
The tiers vary slightly from bank to bank as do the loan to values on the tiers. They also have different tiers depending on location. A property in Vancouver may have higher tiers than one in Fort St john.
So RBC should have gone some blended% higher than 65 but not 80 as a matter of policy.
This is strictly a risk control policy. The most risky properties and clients for a bank are the very high end and the low end but they lose more on the high end.
The other question I have - is this an acreage. If so the banks usually lent on the value of house and a minimal acreage size, often 5 or 10, they may also lend a very low, say 50%, on the value of the remaining acres not used in valuing the house. It can get complicated.
On an exception basis they can and do go the full 80%. But it would be an exceptional property and client that they would do this for.
Do you have an approval from the other two institutions. I know a lot of branch people are not aware of this policy as they seldom deal with homes in this price range. I would ask what their mortgsge tiering is for high value property and make sure you get a firm approval not a preapproval.

Just an FYI, the banks don't put a lot of value on liquid assets on deposit, in their credit decision. These assets can and do move quickly. Either elsewhere, or lose value or lost in a business venture turned sour (or hidden)


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## vi123 (Oct 29, 2015)

andrewf said:


> 3. This is a non-sequitur. The type of loan does not make it tax deductible. Only to purpose to which the loan funds are used.


OK I'll spell it out for you if you want. We sell our investments, pay off the HELOC, borrow the money back, and reinvest. Thus making the interest tax-deductible. I suspect you knew that already, but just wanted to be difficult.


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## vi123 (Oct 29, 2015)

andrewf said:


> 1. Yes. It is riskier.
> 2. You are asking for the bank lend you more on the basis of these assets. Margin loans are unlikely to be called at 20% loan/value which you are suggesting you would have.
> 3. This is a non-sequitur. The type of loan does not make it tax deductible. Only to purpose to which the loan funds are used.


None of that changes the fact that it was bad advice. I hope you're not a financial advisor!


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## andrewf (Mar 1, 2010)

Bad advice? I guess you got your money's worth!


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