Conventional loans are one of the most well-known loan programs for commercial uses. You can use your conventional loan on various business purposes such as multifamily, condominiums, office, mixed-use, retail,warehouse, industrial, hospitality, storage, and land so it brings a big opportunity for every business person. Here are the major benefits with conventional loan program.
Since the buyer is making a bigger down payment on the property, the buyer has more immediate equity in the property. Because the buyer will have a fair cushion of equity, the risk to the bank isn’t as great as in lower down payment purchases. Thus, depending on the lender, there are more options available like a Home Equity Line of Credit.
In extra, conventional Loans do not often require mortgage insurance. High ratio mortgages must be insured by the Canada Mortgage and Housing Corporation or another company approved by the lender, such as Gen-worth Financial or Canada Guaranty. The insurance will protect the bank in the event of a default on the loan.
The insurer will charge a fee for this insurance. The amount of the fee will depend on the amount you are borrowing and the percentage of your own down payment. Typical fees range from 1.00% to 3.50% of the principal amount of your mortgage. This amount may be paid up front or added to the principal portion of your mortgage. Mortgage insurance is for the benefit of the bank, not the buyer, though the buyer pays the premium. If the borrower defaults, the proceeds of the insurance will be paid to the lender, not the borrower.