Conventional lending is offered through the banks, credit unions and mortgage finance companies throughout Canada.
‘A' lending is the ideal financing solution for all borrowers as you will see the lowest rates and typically no fee’s,however given our very restrictive lending guidelines not everybody will qualify.
What Is Alternative Lending?
Alternative lending is quite common in todays market and typically used for self employed borrowers who have not claimed enough personal income or are new to business.
This type of financing is also commonly used for someone that might have bruised or damaged credit.
In most cases alternative lending is a short term solution that is put in place for 1-3yrs while the borrowers situation improves, with an end goal to transition back to an ‘A’ lender.
How Much Do You Need For Down Payment With Alternative Lending?
Alternative lending requires a minimum of 20% down (sometimes more), will have rates roughly 1- 1.5% higher than the banks, and a one time fee payable.
What Is Private Lending?
Private lending is far less common, however certainly serves a purpose.
Private lending comes with no income or credit qualification, however it does have a larger down payment or equity requirement.
Private lenders are taking on a greater risk by bypassing income & credit requirements and for this reason their rates will be the highest.
Typically anybody that is proceeding with a private mortgage has an exit strategy in place to repay that mortgage in a reasonably short timeframe.
What Are Interest Rates Like With Private Lending?
Private rates can range from 6-12% depending on the situationand fee’s are usually double compared to alternative lending.
Are Private & Alternative Lenders “Risky”?
The short answer is no.
Every alternative mortgage product serves its own purpose, and you would never commit to a more expensive mortgage if it did not make financial sense.
Alternative mortgages are typically a short term solution and there should always be a plan to replace this financing within 1-2yrs.
Some private lenders can have very restrictive and expensive terms which should be disclosed by your Mortgage Broker. Similar to Banks, not all private mortgages function the same. (Renewal Fee’s, Open/Closed, Interest Only / Amortized.)
