Mortgage Under A Holding Company

It is possible to buy residential real estate under a brand new holding corporation. All information applies to residential properties only, commercial real estate will be different.

Holding company vs operating company

There are two basic types of businesses, a holding company and an operating company.
- Holding company is not involved in an active business and is only used to own real estate
- Operating company is engaged in an active business

Holding companies limit the liability from an active business in case of any lawsuits.
Generally, lenders will only provide residential mortgages to holding companies. Although some alternative lenders will finance operating companies, it’s still a good idea to buy under a separate holding company.

Holding company mortgage qualification

How can a brand new corporation with no income qualify for a mortgage?
Just like getting a regular mortgage under a personal name, mortgage qualification will be based on the owners personal income and liabilities, credit scores, downpayment, etc. All principals of the holding corporation will have to provide personal guarantees.

Additional documents

In addition to all the regular documents required for a mortgage application, the following will be needed:

  • Articles of incorporation
  • Corporate registry or shareholder list
  • Financial statements
  • Bank statements
  • Borrowing bylaws

Are the rates and fees higher?

While not every lender provides mortgages under a business name and our selection of lenders is somewhat limited, there are “A” lenders that will lend to holding companies at “A” rates.
In cases where we need to access alternative lenders, the rates and fees will be slightly higher.

Independent legal and tax advise

You should consult with an accountant and a lawyer to see if holding companies are right for your situation. All information provided is only from the perspective of obtaining mortgage financing.

Call 647-870-7004 when you are planning on buying real estate under a holding company.