For some, getting a mortgage from a bank has become a bit more challenging – even if your credit score is good If you don’t qualify using the benchmark rate, regardless ofwhat mortgage rate and term you opt for – this has been called the” stresstest” -- then you may be out of luck. With the introduction of new mortgagerules last year, the Government tightened mortgage lending guidelines inresponse to concerns that some markets in Canada are overheated and thatCanadian debt levels continue to increase.
The new mortgage rules have also had an impact on those who want to refinance their mortgage loan. And at renewal time, if you want to increase your existing loan, change your amortization or shop for a better rate, the rules may have an impact as well.
Despite the challenges, there are solutions. A bank is not the only option for a mortgage. The new mortgage rules have created an opportunity for a variety of specialized lenders to enter the market who are flexible and open to reviewing a variety of situations and has led to a growing pool of mortgage funds. In a nutshell - they've gone mainstream
These lenders are not limited to private individuals with money to lend, either individually or as part of an investment pool. Mortgage brokers still have access to those funds; however, the market is also seeing an increase in the number of Mortgage Investment Corporations (MICs) as well as smaller lenders with products to fill the gap.
Many alternative lenders put more weight on the equity in a property, rather than on the work you do or on the credit challenges you may have.
Smaller institutional lenders in some regions across Canada, like credit unions, however, may offer specialized lending with affordable interest rates, reasonable lending fees and flexible underwriting. |
| A few benefits of specialized lending: - Quick closings: The key to a quick close is having your financing set up quickly -- specialized lending can make that happen.
- Terms of the loan: These loans are for short periods of time, usually no more than two or three years.
- Great for investors: Because specialized lenders have flexibility, they will look at those fixer-upper rental properties with a keen eye and may fund both the purchase and the home improvements.
- Diverse repayment options: This is especially helpful for entrepreneurs. Payments can be structured more creatively and may include interest-only payments and balloon payments at the end of the term or on closing of a sale.
- Construction financing: Bank construction financing can be riddled with red tape. Private lending may get the borrower more money, and quicker access to construction draws, which in the end, could save time and money when building a home.
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