In law, inter alia is a Latin term used in legal proceedings, which means “among other things.” In the financial world, an inter alia is a mortgage secured by more than one property. A single mortgage document is executed and registered against each property that is used as security.
Usually, this type of financial tool is set up as a blanket mortgage over two or more properties.
If you live in Canada, there are a few situations where you might make use of an inter alia:
- If you wish to sell an existing property and inter alia it with the home you are buying next. This enables you to obtain the best mortgage rate financing at the lowest overall cost. Once their property sells, the inter alia is discharged, and the new home purchase will be the only charge registered against it.
- Private Mortgage financing where an inter alia charge can be taken to strengthen your application.
- When you’re investing in real estate, and you own one or more properties without a mortgage but are looking to buy additional assets either one by one or at the same time.
And since many people are contacting us with questions regarding their particular situation with an inter alia mortgage, here’s a real-life example to help you understand more about how this type of mortgage works and how it can serve you better;
Inter Alia Mortgage Use – A Real Life Example
Some clients of mine had a high-value ski resort property for sale and a conventional 1st mortgage at a 50% loan to value.
They also had a multi-million-dollar house and farm with a private mortgage at 50% LTV.
The private lender took a 1st mortgage on the farm property and inter alia the ski property with a 2nd mortgage. Their question was whether they could sell a property with an inter alia charge on it?
They did use a mortgage broker to arrange this mortgage loan a few months back, intending to sell the ski hill property. But this is something that should have been negotiated at the time of arranging the mortgage transaction. I told them to review the mortgage contract to see if it was listed in the offer.
The question is now: if it was not listed in the mortgage documents, what would the probability of a sale be?
To estimate the likelihood of this I asked them to tell me what was the 1st mortgage’s rate of interest on the house and farm, and they stated 11%. Now, this might seem like a high rate, but it is within a point or two of the market. Of course, not knowing what the cost of arranging the financing was, left me assuming it was only the market.
With this information, I could suggest to the caller that before selling the ski resort property, they should negotiate with the lender to release the inter alia charge. Now, they would have to come to some agreement before the sale to ensure the closing happens on time.
The lender could release the ski property entirely due to the rate and because the security on the farm property seemed strong enough to stand on its own. The lender also may require a portion of the sales proceeds to pay down the LTV (loan to value) of the farm property.
My Take On Inter Alia Mortgages
At times, mortgages are there to help bridge someone who is equity rich but cash poor. It allows people to use added security to transition wealth from one area to another.
When considering an inter alia mortgage, you must think beyond the original transaction.
In this case, many working parts should have been negotiated before signing the mortgage transaction. Not doing this ahead of time could significantly change the cost of borrowing to a client.
In the case of my clients, I believe the lender will allow a release of the ski hill property but may still want a portion of the proceeds of the sale to pay down the LTV on the farm.
If you want to find out more about inter alia mortgages or other types of alternative loans available in Canada, don’t hesitate to get in touch. We’ll discuss the best financial option for your particular situation and what lenders are best for you to work with.
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