In today’s real estate market, the path to homeownership is not always straightforward, especially given how difficult it can be to qualify for a mortgage. Many homebuyers and homeowners in Brampton, Toronto, and the Greater Toronto Area find themselves facing challenges when it comes to securing a mortgage from A-lenders like major Banks and other prime lenders because of their stringent approval processes. This is why alternative lenders are so important, they provide another pathway to homeownership.
An alternative lender, as the name suggests, is a financial institution or individual that offers financing options outside the realm of traditional lenders such as the big banks. They provide a viable solution for individuals who may not meet the strict criteria set by primary lenders possibly due to a high amount of debt, poor credit, or a unique income situation.
Alternative lenders offer more flexible mortgage qualifying requirements but that typically comes with higher rates. Each lender will have different approval requirements, which is why you should work with a Mortgage Broker who has relationships with the top alternative lenders and knows which lender is best suited to specific needs.
Types of Alternative Lenders
Various types of alternative lenders exist in the market that offer a wide range of solutions, each catering to different segments of borrowers. Let’s take a closer look at some common types:
- Credit Unions: While credit unions are considered traditional lenders, they often have more lenient lending requirements. They operate as member-owned financial cooperatives and can be an excellent alternative for individuals seeking personalized service and flexible loan options.
- B Lenders: B Lenders are available should you not be able to qualify with an A Lender like the major Banks, even though you may have good credit and income. They have more flexible lending criteria and can provide financing to individuals with unique circumstances or lower credit scores. They are particularly helpful with the self-employed who work hard to keep their reported income low for tax purposes but in doing so, don’t have the provable income needed for A lenders. Examples of popular B Lenders include Equitable Bank and Home Trust, although some national lenders, like First National, will have both A and B lending options.
- Mortgage Investment Corporations (MICs): MICs are pooled funds managed by professionals who lend money to borrowers secured by mortgages. They offer an alternative investment opportunity for those who do not qualify with traditional lenders.
- Private Lenders: Private lenders are individuals or organizations that provide short-term (one or two years) first and second mortgages for clients who can’t qualify for a traditional mortgage. A private mortgage gives borrowers time to improve their finances and get in a better position to qualify for a lower-rate traditional mortgage. They typically have more flexible lending criteria like providing a mortgage based on your property value and not your income but charge higher interest rates and fees. Often, the mortgages are interest only.
Private lenders are an important source of mortgage funds because they can save the day when you need to consolidate debt, get a bridge loan, improve your credit, pay off CRA debt, or should your mortgage financing fall through and you need c.
There has been a growing demand for private mortgage financing. According to the Financial Services Regulatory Authority of Ontario (FSRA), in just two short years, the private mortgage industry in Ontario saw a staggering increase from $13 billion to $22.4 million due to tough mortgage qualifying and a clear consumer need.
Benefits of Alternative Lenders
Alternative lenders offer numerous benefits to Canadian homebuyers and owners:
- Flexibility: Alternative lenders understand that not all borrowers fit into a standard lending box. They provide flexible solutions tailored to individual needs, such as adjustable repayment terms, interest-only payments, and shorter approval times.
- Access to Financing: Alternative lenders enable borrowers with unique circumstances, such as self-employed individuals or those with non-traditional income sources, to access financing that may not be available through traditional lenders.
- Quick Approvals: Alternative lenders often have streamlined approval processes, allowing borrowers to secure financing faster than traditional lenders. This can be particularly beneficial in competitive real estate markets and if your real estate deal is in jeopardy of not closing.
- Credit History Flexibility: Alternative lenders take a more holistic approach when assessing creditworthiness. They consider factors beyond income and credit scores, such as property values and other assets, giving individuals with less-than-perfect credit and fluctuating income a chance to secure funding.
- Mortgage Refinancing: Homeowners who may face challenges refinancing their mortgage for debt relief with traditional lenders can turn to alternative lenders for assistance. These lenders can provide options to help homeowners refinance or get a second mortgage.
Choosing the Right Alternative Lender
When considering alternative lenders, it’s essential to work with a Mortgage Broker who has placed many B and private deals, so you know you are dealing with expertise. There are many stories of people being taken advantage of on the alternative lending side of the mortgage marketplace. An experienced and trusted Mortgage Broker will know which alternative lenders have the best reputation, are upfront with fees, and offer the mortgage features you need for your current situation and where you want to go.
Expert Guidance from Rakhi Madan
Navigating the alternative lending landscape can be complex and overwhelming. That’s why it’s crucial to seek expert guidance from a trusted mortgage broker like Rakhi Madan. With years of experience and a deep understanding of the alternative lending market, Rakhi can provide personalized advice tailored to your unique financial situation.
Brampton Mortgage Broker Rakhi Madan will:
- Assess Your Needs: Rakhi will assess your specific circumstances and financial goals to determine if alternative lending is the right solution for you.
- Shop and Negotiate the Best Option: Rakhi will leverage her extensive network and knowledge of alternative lenders to find the best options available to you. She will compare interest rates, loan terms, and fees to ensure you receive the most favourable financing option. Her expertise and industry relationships allow her to advocate for your best interests.
- Provide Expert Advice: Rakhi will guide you through the application process, explaining each step and offering valuable insights along the way. She will address any concerns or questions you may have, ensuring you feel confident in your decision. Once you’ve chosen an alternative lender, Rakhi will facilitate a smooth closing process. She will work closely with all parties involved to ensure timely funding.
- Plan an Exit Strategy: If your current need is met with a private lender, Rakhi will work with you to ensure you have a solid exit strategy that will provide a clear roadmap for transitioning from the private lender to a conventional financing option at more favourable terms. This is important because a private mortgage is a short-term, stop-gap measure, and should never be a long-term solution. As an example, if you used a private mortgage to consolidate your high-interest debt, the credit agencies will be advised of this which will help improve your credit score so you can ultimately qualify for better rates.
Seeking Help with Your Current Mortgage
If you’re an existing homeowner facing challenges with your current mortgage, alternative lenders can also help. Whether you’re struggling with high interest rates, missed payments, or a difficult renewal process, Rakhi Madan can help explore alternative lending options to alleviate your financial burden. Or you may not want to break your current fixed-rate mortgage so you can keep your rate and not pay a penalty. An alternative lender could assist by approving you for a second mortgage.
Yes, Alternative Lenders are Important!
Alternative lenders offer a lifeline to an increasing number of Canadian homebuyers and owners when they don’t meet the requirements of traditional lenders. Their flexibility, quick approvals, and willingness to consider unique circumstances make them crucial to today’s real estate market. However, it’s vital to approach alternative lending with careful consideration and seek expert guidance from trusted Brampton Mortgage Broker Rakhi Madan. Rakhi will help you navigate the complexities of alternative lending so you can confidently explore all your options, understand the pros and cons of each, choose the right lender, and navigate your homeownership journey for success.
Rakhi Madan’s expertise and personalized approach can make a significant difference in securing financing and achieving long-term financial success.
