For some, getting a mortgage from a bank has become more challenging. If you can not qualify using the new 'stress 'test' benchmark rate then you may have already been declined by your local bank. Keep reading.
The Federal Government tightened mortgage lending rules last year in response to concerns that some markets in Canada are overheated and Canadian debt levels continue to increase. The new mortgage rules impact buyers, those refinancing or porting as well as those renewing and looking to move lenders.
The good news? The big five banks are not the only option for your mortgage.
The new mortgage rules have created an opportunity for a variety of alternative lenders to enter the market. They are not new to lending, they have gone mainstream. These lenders are not limited to private funds, either individually or as part of an investment pool. We have also seen an increase in the number of Mortgage Investment Corporations (MICs) to fill the demand. 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.
A few benefits of alternative lending:
- Quick closings: alternative lenders will approve & provide funding faster than other lenders
- Terms of the loan: typically short term so you can move back to a traditional lender as your long term plan
- Great for investors: alternative lenders have flexibility, they look at fixer-upper rental properties with a keen eye and may fund both the purchase and the home improvements
- Diverse repayment options: 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: alternative lenders may offer more more money and quicker draws than the banks which saves you money when building a home
Have you been turned down by your bank? Call me and let's find a lender to approve you!