Alternative mortgages can help in some cases – Mortgage Matters
Everyone likes to believe they’ll qualify for the best rates and terms when they start shopping for a mortgage, but that’s not always the reality.
Most residential mortgages fall into three categories:
• Lenders “A” – Chartered banks, credit unions and monoline mortgage companies. These lenders offer the best rates and terms, including insured mortgage products.
• Alternative lenders – They are regulated mortgage lenders. These are monoline banks, trust companies and mortgage companies. Rates are slightly higher and there may be a fee to set up the mortgage. Many of these companies also offer “A” products to their customers.
• Private lenders – Investment companies and individuals who are willing to lend their funds and generally have higher rates and fees while offering shorter terms.
A growing number of homeowners are now turning to alternative lending solutions for a variety of reasons, including the fact that qualifying for a mortgage is more difficult due to stricter eligibility rules and higher interest rates. high today.
Here are some situations where an alternative lender can provide solutions.
You are self-employed
Writing off expenses to minimize tax implications is great for tax planning, but it will leave you reporting minimal income on your tax returns. Conventional lenders want to see verifiable income while alternative lenders understand this strategy and can offer competitive products. The rates of many of these lenders are not much higher than those of the “A” lenders.
Alternative lenders have now become the lenders of choice for many business owners. The higher rates can be compensated by the structuring of the company.
Bruised or damaged credit
We’re not always in control and life happens – marriage breakdowns, health issues. There can be many reasons why credit can be damaged.
Alternative lenders will look at the overall picture and if there is a strong income and employment history, they may offer a temporary solution while you work on repairing your credit with the intention of returning to a lender” HAS”.
Atypical sources of income
With this new economy, many people now have other sources of income – a part-time job, an online business or side gig, Air BnB or tips. “A” lenders will want to see a two-year history of this income reported on your tax returns before including it in your qualifying income.
Some alternative lenders may consider this income depending on the overall strength of your application.
New implications of stress testing
The stress test has certainly made it harder to get a mortgage. You should now qualify for a rate two percent above the contract rate. Today, the best rate on an uninsured five-year fixed term mortgage is around 4.94%, so you should now qualify at 6.94%.
“A” lenders are limited to working within certain debt service ratios. Depending on your down payment and credit history, alternative lenders may consider extending these ratios to qualify.
Alternative lenders play a very important role in the Canadian lending market by helping customers who do not fit “A” lenders.
It is important that you work with a mortgage broker experienced in private and alternative lending to ensure you receive the best options and advice, including a plan for the future.
If you would like to have a conversation about possible alternative mortgage solutions, please call me at 1-888-561-2679 or email [email protected].
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.