What Can A Alternative Mortgage Lender Do For Me?
If you fail the stress test, you will be unable to get a mortgage from a major bank, or if you currently have a mortgage, you will be trapped with your present lender. This might result in you being tied to your present lender even if their mortgage rates are higher than those offered by competing lenders. Alternative mortgage lenders that are not banks are not obliged to perform a stress test on mortgages. These alternative lenders are more flexible regarding who they would lend to and may assist you when regular lenders are unable to.
This may enable you to get mortgage financing even if you have a poor credit score, low or fluctuating income, or high debt.
What Do Alternative Mortgage Lenders Do?
Many individuals who don’t qualify for a standard mortgage do so via alternative mortgage providers, such as lenders who consider non-traditional income when determining mortgage affordability.
Your mortgage does not have to be with your main bank. Canadian banks have strict criteria for who they will lend. Banks must perform a mortgage stress test to determine your ability to pay. If you fail, you won’t get a standard bank mortgage.
You must also pass the stress test to refinance or move your mortgage to a major bank. If you renew with the same lender, no stress test is required. To put it simply, failing the stress test means you can’t borrow more from your home equity or transfer mortgage lenders.
Types of Alternative Mortgages
Private Mortgages
Unlike a bank or credit union, private investors provide private mortgages. They are unregulated by the state and hence may lend to hazardous borrowers. Increased interest rates and costs compensate for this. Most private lenders use mortgage brokers.
It is often the final recourse for homeowners. Most private mortgages are for one or two years. They favour home equity above a high salary or credit score.
A private mortgage may help you get back on track financially to switch to a standard mortgage provider with reduced rates at the end of your term. Paying your mortgage on time, developing credit, and paying off debt might help you qualify for a standard mortgage.
Bridge Financing
If you’re buying a house but haven’t sold your existing one, you may require financing for the down payment on the new one. Bridge loans enable you to get money for a down payment while waiting for the sale of your house. Bridge loans are generally for a few months and enable you to buy a property without selling your current one.
Traditional lenders like banks and private lenders provide bridge gap loans.
Reverse Mortgage
A reverse mortgage eliminates the need to make monthly mortgage payments to the lender. Reverse mortgages are only available to Canadians over 55. They don’t need monthly mortgage payments or income.
A reverse mortgage enables retirees to augment their income without selling their property. The reverse mortgage and interest will be repaid when the debtors sell their house, relocate, or die.
Construction Loans
A construction loan offers temporary funding for building a new house. Construction loans may be extended, repaid in full, or rolled into a mortgage. Others demanded merely interest payments.
Second Mortgages
A second mortgage lets you borrow extra money if you already have one. Second mortgages are based on equity. Higher home equity allows for more borrowing.
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