What is Alternative Lending?

General Trish Pigott 26 Jul

When traditional lenders, such as banks or credit unions, deny mortgage financing, it can be easy to feel discouraged. However, there is always an alternative!

If you’re seeking a mortgage, but your application doesn’t fit into the box of the big traditional institutions, you’ll find yourself in what’s commonly referred to in the industry as the “Alternative-A” or “B” lending space. These lenders come in three classifications:

  • Alt-A lenders consist of banks, trust companies and monoline lenders. Large institutional lenders are regulated provincially and federally but have products that may speak to consumers who require broader qualifying criteria to obtain a mortgage.
  • MICs (Mortgage Investment Companies) are much like Alt-A lenders. Still, they are organized per the Income Tax Act with an incorporated lending company consisting of individual shareholder investors pooling money together to lend on mortgages. These lenders follow particular qualifying lending criteria but operate with a broader qualifying regime.
  • Private Lenders are typically individual investors who lend their funds but can sometimes also be a company formed specifically to lend money for mortgages that carry a higher risk of default relative to a borrower’s situation. These lenders are generally unregulated and cater to those with a higher risk profile.

All classifications noted above price based on risk when it comes to a mortgage. The more broad the guidelines are for a particular mortgage contract, the more  the lender assumes. This, in turn, will have a higher cost to the borrower, typically in the form of a higher interest rate and possibly a lender fee.

Before considering an alternative mortgage, here are some questions you should ask yourself:

  1. What issue keeps me from qualifying for a traditional “A” mortgage today?
  2. How long will I correct this issue and qualify for a traditional lender mortgage?
  3. How much do I have to improve my credit situation or score?
  4. How much do I currently have available as a down payment?
  5. Should I wait until I can qualify for a regular mortgage, or do I want/need to get into a certain home today?
  6. Is this mortgage sustainable? Can I afford the higher interest rate and payments?
  7. Can I exit this lender if the lender does not renew, or can I not afford this alternative option much longer?

Suppose you are ready to go ahead with an alternative mortgage due to a weaker credit score, or you don’t want to wait until you can qualify with a traditional lender. In that case, these are some additional questions to ask when reviewing an alternative mortgage product:

  1. How high is the interest rate? What are the fees involved, and are these fees paid from the proceeds, added to the balance or paid out of pocket
  2. What is the penalty for missed mortgage payments? How are they calculated? What is the cost to get out of the mortgage altogether?
  3. Is there a prepayment privilege? For example, can you avoid penalties if you give the lender a higher mortgage payment once a month?
  4. What is the cost of each monthly mortgage payment?
  5. What happens at the end of the term? Is a renewal an option, and what are the costs to renew if applicable?
  6. What is the fine print?

When it comes to the alternative lending space, things can get complex. Contact us today if you have been turned away from the bank! We can help you source out various mortgage products and review the rates and terms to ensure it is the best fit for you!

Have any questions or are looking for mortgage assistance? Contact us today at 604-552-6190 or email us at support@primexmortgages.com

CLICK HERE to book a quick call to review your mortgage!

Trish & The Primex Team

 

The Difference Between Guarantors and Co-Signers

Home Tips Trish Pigott 19 Jul

Thank you to our partners at First National for a breakdown on the difference between the two.

  • What is the difference between a Guarantor and a Co-signer?
    • Guarantors are not on title to the property but will provide a guarantee to ensure the mortgage debt is being paid by signing the mortgage commitment and the mortgage charge as a guarantor. The guarantor should be able to contribute to servicing the mortgage debt if called upon.
    • Co-signers will be on title to the property and will provide a guarantee to ensure the mortgage debt is being paid by signing the mortgage commitment, the mortgage charge and any other documents that would normally be signed by a borrower on title to a property. The co-signer should be able to contribute to servicing the mortgage debt if called upon. Co-signers are normally required when the main applicants have poor credit and income.
  • Insured and Insurable Mortgages
    • Must be immediate family members – father, mother, child, brother, sister, grandparent, legal guardian or legal dependent, spouse or common law partner.
    • Does not need to occupy the property.
  • Conventional, Uninsurable Mortgages
    • Guarantor must be a spouse or common law partner.
    • Must be occupying the property.

These are general guidelines and there may be more to the borrower’s application. Each application is different and may be subject to further adjudication and conditions. At Primex, we will double check to make sure you qualify.

Have any questions or are looking for mortgage assistance? Contact us today at 604-552-6190 or email us at support@primexmortgages.com

CLICK HERE to book a quick call to review your mortgage!

Trish & The Primex Team 

Bank of Canada’s July Announcement & What This Means for You.

General Trish Pigott 12 Jul

The Bank of Canada announced this morning that the key interest rate will be raised another 25 basis points. This morning’s announcement will be the fifth interest rate announcement of 2023, but the 10th rate hike since the start of the tightening in 2022, with three more scheduled for the rest of this year. The next announcement is September 6th.

Prime Rate is now at 7.20%, the highest it’s been in 22 years.

Last month’s announcement raised the key rate another 0.25%. These rate hikes are supposed to relieve inflation. Canada’s inflation rate rose to 8.1% in June, but Statistics Canada reports that consumer spending has remained high. The annual change in the Consumer Price Index measures inflation.

The BoC’s goal is to keep inflation around 2%, but their forecasters are currently predicting inflation will return to 2% closer to mid 2025. The Forecasters say that this is due to excess demand, higher than expected housing prices and higher than expected prices for tradable goods.

Experts weren’t sure if this rate hike would bring another rate hike or hold. Experts shared that if the BoC increased the rate by another 0.25%, we should see a decrease in prices in the housing market.

Over the past two years, prices of goods and services have risen rapidly, corrupting the dollar’s purchasing power and making life less affordable for Canadians. Raising the rates makes it more expensive for households and businesses to borrow money and service their debts. Higher rates will eventually reduce demand for goods and services, slowing the pace of price increases.

Interest rate changes often fully impact economic growth inflation 18 to 24 months after an announced change.

CIBC Senior economist Andrew Grantham seems to disagree with the interest rate hikes, calling recent hikes “unnecessary” and a “mistake.” Grantham said that current consumer spending is still lower than pre-pandemic levels, suggesting that much of the growth in consumer spending is levelling out to regular numbers since the pandemic lock down.

If you are concerned about increased mortgage payments or how this might affect you, please do not hesitate to reach out. We can analyze your current situation and assess your goals and needs for the upcoming years and find the best option for you. We have been able to help many clients switch from Variable to Fixed these past few months to save them from the increasing payments out of their control. If you are wondering how restructuring your mortgage can help free up cash flow or manage your debt, then let’s chat!

 

CLICK HERE to book a quick call to review your mortgage!

604-552-6190

support@primexmortgages.com

Trish & The Primex Team

9 Tips for a Successful Appraisal

Home Tips Trish Pigott 5 Jul

Before banks or lending institutions can consider loaning money for a property, they need to know the current market value of that property.

An appraiser’s job is to check the general condition of your home and determine a comparable market value based on other homes in your area. Appraisals are required for any buy or sell situation.

To help make the appraisal as smooth as possible and ensure you are getting top market value, check out the tips below:

  1. Clean Up: The appraiser is basing the value of your property on how good it looks. A good rule of thumb is to treat the appraisal like an open house! Stage it as you would a home for sale, clean and declutter every room, vacuum and tidy to show the appraiser that the property is well cared for. Where applicable, remove any personal items that might make the appraiser lower the value of your home.
  2. Curb Appeal: First impressions can have a significant impact on an appraisal. Spending time ensuring the outside of your property, from your driveway entrance to the front step, is clean and welcoming can make a difference. Yard work and removing debris and garbage will make a big difference.
  3. Visibility: The appraiser must be able to see every room of the home, with no exceptions. YES, every room, including outbuildings, garage, closets, basement… Refusal to allow an appraiser to see any room can cause issues and potentially cause a decline of your file. If there are any issues with any spaces in your home, be sure to take care of them in advance to allow the appraiser full access. NOTE: If tenants are in your home, ensure you give them the appropriate amount of notice for access. If the appraiser can not get access to every room, they will have to return and can be an added expense to you for the return trip.
  4. Upgrades and Features: Ensuring the appraiser knows any upgrades and features can go a long way. Make a list and include everything from plumbing and electrical to new floors, new appliances, etc. This way, they have a reference for what has been updated and how recent or professional that work was done. Knowing the age of the roof and HVAC items like the water tank is essential. Also, ensure the breaker box is MIN 100amps as most lenders cannot finance a home with amps under 100; older homes from the 1930 area are generally only 60amps.
  5. Be Prudent About Upgrades: While the bathroom and kitchen are popular areas, there are better options than the be-all-end-all for getting a higher home value. These renovations can be pretty costly, so it is a good idea to be prudent about how you spend your money and instead focus on easy changes such as new paint, new light fixtures or plumbing and updated flooring to avoid breaking the bank while still having your home look fresh. Removing clutter, adding a new coat of paint and doing a deep cleaning will help make these spaces shine.
  6. Know Your Neighbourhood: You already know where you live better than the appraiser. Looking at similar homes in your neighbourhood and noting what they sold for will give you a ballpark. Keep in mind that an appraiser has to use comparable solds in your area and not current active listings. Generally they will collect 3-6 comparables over the last 90 days.
  7. Be Polite: The appraiser is there to get in and get out, so let them have the run of the house while they are there. Please do not follow them around, avoid asking them too many questions or making too many comments, and simply be prepared should they have questions. Once they have completed the review of your home, that is an excellent time to bring up any comments you might have. Remember, the onsite inspection usually is only 15 minutes through the house. The rest of the time is spent gathering data and reviewing sales and other forms of research to create the appraisal report.
  8. The Report: Even though the customer pays for the appraisal, the report belongs to the lender that it is prepared for. The reports are not given to the customer directly. Don’t be offended if your mortgage broker or the lender does not share the report with the homeowner, this is policy for all appraisal firms and lenders.
  9. Know The Costs: Every appraiser charges differently. There are a number of factors involved with the range in cost of an appraisal.  Whether it is an acreage property, large square footage or unique overall, those are a few examples of upcharges. Travel time can also be an extra charge for an appraiser if they have to travel to get to your location. You will pay for your appraisal usually through an online portal with your credit card information.

Remember to contact us at Primex Mortgages if you have questions about your existing home or mortgage or want to sell and relocate! CLICK HERE to book a quick call to review your mortgage!

Trish & The Primex Team

Contact us today!

604-552-6190

support@primexmortgages.com