Alternative Lending Provides you with Options
Alternative lending refers to any lending practices that fall
outside the normal banking channels. Alternative lenders think
outside the box and offer solutions to Canadians who wouldn’t
otherwise qualify for traditional mortgage financing.
In an ideal world, we’d all qualify for the best mortgage terms
available. However, this isn’t the case. Securing the most
favourable terms depends on your financial situation. Here are
a few circumstances where alternative lending might make
sense for you.
Damaged Credit
Bad credit doesn’t disqualify you from mortgage financing.
Many alternative lenders look at the strength of your
employment, income, and your downpayment or equity to
offer you mortgage financing. Credit is important, but it’s not
everything, especially if there is a reasonable explanation for
the damaged credit.
When dealing with alternative lending, the interest rates will
be a little higher than traditional mortgage financing. But if the
choice is between buying a property or not, or getting a
mortgage or not, having options is a good thing. Alternative
lenders provide you with mortgage options. That’s what they
do best.
So, if you have damaged credit, consider using an alternative
lender to provide you with a short-term mortgage option. This
will give you time to establish better credit and secure a
mortgage with more favourable terms. 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
competitive products.
As interest rates on alternative lending aren’t that far from
traditional lending, alternative lending has become the home
for most serious self-employed Canadians. While you might
pay a little more in interest, oftentimes, that money is saved
through corporate structuring and efficient tax planning.
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, the alternative lender channel
allows expanded debt-service ratios. This can help finance the
more expensive and suitable property for responsible
individuals.
Traditional lending restricts your GDS and TDS ratios to 35/42
or 39/44, depending on your credit score. 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. It’s not the wild west, but it’s
certainly more flexible.
Connect anytime
Alternative lending can be a great solution if your financial
situation isn’t all that straightforward. The goal of alternative
lending is to provide you with options. You can only access
alternative lending through the mortgage broker channel.
Please connect anytime if you’d like to discuss mortgage
financing and what alternative lending products might suit
your needs; it would be a pleasure to work with you.
