4 Ways Alternative Lending Beats Traditional Bank Financing

CoryVance • Jan 23, 2020

Alternative lending refers to lending practices that fall outside the normal banking channels. These are lenders that think outside the box and offer lending solutions to Canadians who wouldn’t otherwise qualify for traditional bank products.

Although we all like to think that we’re going to qualify for the best mortgages available, this isn’t always the case. Sometimes life just gets in the way! So here are four times that alternative lending beats your typical banking practices.

Damaged Credit

Life happens, businesses and marriages break down, health can be taken for granted and then taken away. Regardless of why credit has been damaged, there are alternative lenders that look at the strength of employment and income, and the downpayment or equity to offer a new mortgage.

Although the rates can be a little higher here, if it’s the choice between buying a property or not, having options is always a good thing and that’s what the alternative lenders will do, offer options.

If you do have damaged credit, the goal is to be working towards establishing better credit and moving back into a typical mortgage as soon as possible. Use an alternative lender to bridge that gap!

Self-Employment

If you run your own business, you most likely have considerable write-offs that make sense for tax planning reasons but don’t do so much for your verifiable income. Traditional lenders want to see verifiable income, alternative lenders can be considerably more understanding and offer very competitive products.

As the rates on alternative lending aren’t that far from A lending, alternative lending has become the home for most serious self-employed Canadians. Yes, you might pay a little more in interest rates, but oftentimes that money is saved through corporate structuring.

Non-traditional income

Welcome to the new frontier of earning an income.

If you make money through non-traditional employment like Airbnb, tips, commissions, uber, or uber eats, alternative lending is more likely to be flexible to your needs. Most traditional lenders want to see a minimum of two years of established income before considering income on a mortgage application. Not always so with alternative lenders (depending on the strength of your overall application).

Expanded Debt-Service Ratios

With the government stress test significantly lessening Canadians ability to borrow, it’s a good point to note that there are lenders in the alternative channel that allow expanded debt-service ratios which can help finance more expensive (and suitable) property for responsible individuals.

Typical A channel lenders are restricted to GDS and TDS ratios of 35/42 or 39/44 (depending on credit). However, alternative lenders, depending on the loan-to-value ratio can be considerably more flexible. The more money you have as a downpayment, the more you’re able to borrow and expand those debt-service guidelines.

So there you have it, 4 ways alternative lending beats out traditional bank financing. If you would like to discuss mortgage financing, please don’t hesitate to contact me anytime!

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CORY VANCE

403-614-9211

cory@coryvance.ca

What You Need To Know About Online Mortgage Calculators

By Cory Vance • 23 Apr, 2024

You’d think an online calculator is a pretty straightforward device, one that you should be able to place your confidence in, and for the most part, they are. Calculators calculate numbers. The numbers are reliable, but how you interpret those numbers, not so much, especially if the goal is mortgage qualification. If you rely on the numbers from a “What can I afford” or “Mortgage Qualification” calculator without talking to an independent mortgage professional, you’re going to be misinformed. Don’t be fooled. Even though an online mortgage calculator can help you calculate mortgage payments or help you assess how additional payments would impact your amortization, they’ll never be able to give you an exact picture of what you can afford and how a lender will consider your mortgage application. While mortgage calculators are objective, mortgage lending isn’t. It’s 100% subjective. Lenders consider your financial situation, employment, credit history, assets, liabilities, the property you are looking to purchase. Then, they will compare that with whatever internal risk profile they are currently using to assess mortgage lending. Simply put, they don’t just look at the numbers. An online calculator is a great tool to help you run different financial scenarios and help assess your comfort level with different payment schedules and mortgage amounts. However, if you rely on an online calculator for mortgage qualification purposes, you’ll be disappointed. The first step in the mortgage qualification process is a preapproval. A preapproval will examine all the variables on your application, assess your financial situation, and provide you with a framework to buy a property based on your unique circumstance. Securing a preapproval comes at no cost to you and without any obligation to buy. It’ll simply allow you the freedom to move ahead with confidence, knowing exactly where you stand. Something a calculator is unable to do. Please connect anytime if you’d like to talk more about your financial situation and get a preapproval started. It would be a pleasure to work with you.

Understanding the Recent Housing Affordability Measures in Canada

By Cory Vance • 19 Apr, 2024

In recent years, housing affordability has become a significant concern for many Canadians, particularly for first-time homebuyers facing soaring prices and strict mortgage qualification criteria. To address these challenges, the Canadian government has introduced several housing affordability measures. In this blog post, we'll examine these measures and their potential implications for homebuyers. Increased Home Buyer's Plan (HBP) Withdrawal Limit Effective April 16, the Home Buyer's Plan (HBP) withdrawal limit will be raised from $35,000 to $60,000. The HBP allows first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan (RRSP) to use towards a down payment on a home. By increasing the withdrawal limit, the government aims to provide young Canadians with more flexibility in saving for their down payments, recognizing the growing challenges of entering the housing market. Extended Repayment Period for HBP Withdrawals In addition to increasing the withdrawal limit, the government has extended the repayment period for HBP withdrawals. Individuals who made withdrawals between January 1, 2022, and December 31, 2025, will now have five years instead of two to begin repayment. This extension provides borrowers with more time to manage their finances and repay the withdrawn amounts, alleviating some of the immediate financial pressures associated with using RRSP funds for a down payment. 30-Year Mortgage Amortizations for Newly Built Homes Starting August 1, 2024, first-time homebuyers purchasing newly built homes will be eligible for 30-year mortgage amortizations. This change extends the maximum mortgage repayment period from 25 years to 30 years, resulting in lower monthly mortgage payments. By offering longer amortization periods, the government aims to increase affordability and assist homebuyers in managing their housing expenses more effectively. Changes to the Canadian Mortgage Charter The government has also introduced changes to the Canadian Mortgage Charter to provide relief to homeowners facing financial challenges. These changes include early mortgage renewal notifications and permanent amortization relief for eligible homeowners. By implementing these measures, the government seeks to support homeowners in maintaining affordable mortgage payments and mitigating the risk of default during times of financial hardship. The recent housing affordability measures announced by the Canadian government are aimed at addressing the challenges faced by homebuyers in today's market. These measures include increasing withdrawal limits, extending repayment periods, and offering longer mortgage amortizations. The goal is to make homeownership more accessible and affordable for Canadians across the country. As these measures come into effect, it's crucial for homebuyers to stay informed about the changes and their implications. Consulting with a mortgage professional can help individuals explore their options and make informed decisions about their housing finances. If you're interested in learning more about these changes and how they may affect you, please don't hesitate to connect with us. We're here to walk you through the process and help you consider all your options and find the one that makes the most sense for you.