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What are Interalia
Mortgages? Interalia
mortgages (also called Blanket Mortgages) refers to when a single
mortgage document is registered over more than one property.
Interalia
mortgages are sometimes used to cover a shortfall of security.
For example, an entrepreneur (who, in this example, cannot
demonstrate sufficient income) would like to purchase a house for
$500,000 but has only $100,000 to place as a down payment.
Typically, banks will lend up to 65% loan-to-value (LTV) or
$325,000. In addition, a private lender can be found to
lend 10% ($50,000) on a 2nd mortgage basis, bringing the LTV to
75%. But, there still remains to be a shortfall of $25,000
($500,000 - $325,000 - $100,000 - $50,000).
| Say,
for example, that the borrower's parents owns a house worth
$300,000, which has a mortgage owing of $200,000. The
parents, however, do not qualify for a conventional mortgage
since they have |
 |
| retired.
The private lender can finance the $25,000 shortfall using
an interalia 2nd mortgage against this property. |
Instead
of using a two mortgage documents, a single interalia mortgage of
$75,000 ($50,000 + $25,000) is used. In effect, the
mortgage of $75,000 is secured by both properties. This
deal is more attractive to the lender since the lender has recourse
against both properties.
|
Mortgage
Amount
|
Property
1
- $500,000
|
Property
2 - $300,000
|
|
1st
mortgage
|
$325,000
|
$200,000
|
|
2nd
mortgage
|
$75,000
|
$75,000
|
|
LTV
|
80%
|
92%
|
It is
therefore important to find out from the borrower whether there is
any other property available for security when there is a security
shortfall.
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