High interest rates, a rise in home prices, poor credit, and mortgage pressures have led consumers to seek alternative lending solutions to finance or refinance a mortgage. Thankfully, there are various alternative mortgage solutions to consider.
So what does that look like in practice? Here are alternative mortgage solutions in Canada worth knowing about, whatever stage of homeownership you're at.
Mortgage Options for Potential and Existing Homeowners
If you’re worried your credit score or debt may limit your ability to get a mortgage – you’re not alone. Perhaps you’ve been declined by a bank or are worried your credit score is considered weak. Whatever the reason, you have options. The institutions below generally offer less strict guidelines for mortgage agreements compared to A-Lenders.
B-Lenders
B-Lenders are in place to help you if you can’t get a mortgage from one of the major banks. The four main B-Lenders are MCAP, First National, Metrix, and RFA. These institutions deal mostly with insured mortgages and are increasingly being used for refinancing mortgages.
Nearly two-in-five mortgage holders (41%) have considered switching lenders in the past year, according to an Equifax study, with younger mortgage holders (under 35) most likely to switch, prompted by mortgage pressures.
Private Lenders
Do you work for yourself, have bad credit, or have a short credit history? Choosing a shorter-term mortgage from private lenders, compared to the Big Banks, may be a viable option. Working with a private lender comes with a quicker turnaround for applicants. If you’re a homeowner who needs a speedy application process, doesn’t qualify for a mortgage with a traditional bank, or wants access to your home equity, a private lender may be your best solution. Private lenders are often used as a short-term solution due to their higher rates and fees.
Monoline Lenders
This type of lender is a financial institution that specializes in one type of loan: mortgages, compared to the additional service offerings by other financial institutions. While most of these lenders have flexible contract agreements, available through mortgage brokers, it’s prudent to check the agreement details, including the schedule, prepayment rules, penalty and renewal options. The rates and fees are often lower due to limited physical branches and a more focused model.
Mortgage Investment Corporations (MICs)
Also known as Mortgage Investment Equities (MIEs), MICs operate as alternative lenders and cater to Canadians with poor credit, unconventional income, and individuals needing bridge financing.
The cons of choosing a MIC are that borrowers will be charged higher interest rates and fees due to being higher-risk borrowers. MICs are sometimes referred to as the “lender of last resort.” Most mortgages from a MIC are on a one-year term at fixed rates (but some are set at variable rates).
Your Next Step Starts Here
While there are alternatives to the traditional Big Bank mortgage lenders, consumers need to be informed about each available option and the benefits and risks associated with each one. Get a Better Mortgage advisors can help direct you to the best mortgage solution based on an evaluation of your financial situation.
Get a Better Mortgage (GABM) offers personalized, professional, and ethical mortgage services. GABM also gives advice on custom mortgage solutions, including buying a second home, debt consolidation loans, self-employment mortgages, and more. Every credit journey looks different. Book a Consultation with us today.
