Canada’s biggest mortgage lender is offering an unprecedented $250,000 loan to help finance a $500,000 house sale in Toronto.
The loan will help fund the purchase of a two-bedroom, one-bath house in Toronto’s Scarborough neighbourhood.
The money will be paid back in full in five years, but the lender has also offered to pay interest on the loan as well as repay any remaining balance through a 10-year, variable-rate mortgage, said David Della Rocca, CEO of First Credit Corp.
The bank said it will also provide the buyer with a “bridge loan” that will pay interest plus an additional 3 per cent to finance the purchase.
First Credit is owned by the Canadian Imperial Bank of Commerce.
It was established in 2013 by the former prime minister Stephen Harper.
It is the biggest Canadian mortgage lender, with a market capitalization of $10.6 billion.
The company has a history of lending to large-scale real estate projects and is part of the Canadian National Mortgage Corp., which was launched in the United States in 1998.
The deal with First Credit will be the first time the bank has offered a loan for a residential sale in Canada.
It has previously lent to Canadian banks to finance large-sized real estate developments, such as Toronto’s $1.4-billion Eaton Centre mall, and to Canadian condo developers.
The lender will be using its leverage on its $500 million loan to finance a buyer’s purchase of the house.
The mortgage will be structured as a variable-rated loan with a 10 per cent variable rate and a 3 per-cent variable rate, which means the borrower will repay interest on both the loan and the variable rate.
It will also pay interest and penalties to the bank.
The buyer will pay the bank interest on its portion of the purchase price and will also repay interest and penalty on the remaining $250 million balance on the mortgage.
The remaining balance is expected to be paid over 10 years.
Della Roccas said that, with the sale, First Credit is now the largest private lender in Canada with $1 billion in assets under management.
The bank is owned in part by the CND Group, a private Canadian real estate investment company, which is based in Toronto and has about $1 trillion in assets.
The transaction will create a family of five with two adults and three children, with an annual income of $45,000.
Della said the sale price of the property is expected the buyer will receive $1,500, or about $10,000 more than it would have paid with an interest rate of 3 per.