04 Sep Best Alternative Mortgage Lenders in Canada

Obtaining a mortgage can be difficult for many potential homebuyers, especially if you are having a low credit score. Prime lenders, with their strict lending requirements make it harder for borrowers to get approved for a mortgage, most probably in cases where borrowers have a non-traditional income, no employment history, debt, or bad credit history. This is where alternative lenders in Canada come in. The lending they offer provides more flexible options to those who can’t fulfill the higher standards lay down by prime lenders.

What Is Alternative Lending?

Alternative lending, also known as B lending, subprime lending, or private lending, offers alternative mortgage solutions to borrowers who are unable to fulfill the prime lenders’ qualification standards or seek a mortgage solution that prime lenders do not normally supply. These lenders provide mortgage solutions to customers with significant equity or net worth, non-traditional or self-employed income sources, or unusual financial conditions. Alternative lenders include financial institutions, mortgage finance businesses, mortgage investment corporations (MICs), independent private (syndicate) lenders, and trust firms.

Some of the best alternative mortgage lenders in Canada offering reliable mortgage solutions include:

• Private Mortgages 

Private mortgages are not subject to strict rule and are frequently used a short-term option, with financing terms ranging from three to six months. These mortgages have a much higher interest rate than A and B loans. Private mortgages will demand interest-only payments and an exit strategy in case the lender/investor decides not to renew at the end of your term.

• B Lending Mortgages 

Mortgage options for borrowers who do not match the tight lending criteria of A lenders. These mortgages are available to borrowers that have more equity or net worth, are self-employed, or have nontraditional income sources. B lending mortgages often feature higher interest rates than A lending options and periods of up to a year.

• Bridge Financing 

Also known as a bridge loan, it is a sort of short-term financing used by homeowners to pay the cost of purchasing a new house while they wait for the sale of their current property to be completed. Bridge financing is often offered by prime lenders, in which a PPSA lien is issued against the property sold to cover the difference between the sale price and the seller’s equity. In contrast, private lenders may provide it as a short-term loan.

• Reverse Mortgage 

A perfect mortgage financing option for borrowers aged 55 and older. A reverse mortgage uses up to 55% of the borrower’s home equity, which is decided by the borrower’s age, appraised value of the home, and the lender. Reverse mortgages provide borrowers with tax-free funds and do not demand monthly repayments.

• Construction Loans 

A construction loan or mortgage permits a borrower to finance the purchase of a pre-construction home. Unlike other mortgage types, this mortgage is paid out in smaller increments when each building phase is completed rather than a lump sum payment.

• Second Mortgages 

A second mortgage is usually structured as a home equity line of credit (HELOC) or a home equity loan. The amount borrowed is typically less than the first mortgage because it uses the equity built up in the home, and interest rates are higher to compensate for the added risk of the mortgage being in second position.

• Self-Employed Mortgages 

It is a perfect mortgage for borrowers who generate non-salary income or are paid by a corporation in which they possess a majority stake. Self-employed mortgages can be obtained through prime (A) or subprime (B) lending, depending on the income qualification. Self-employed borrowers profit from subprime mortgages since the annual interest rate is typically lower.

• Vendor Take Back (VTB) Mortgages

Vendor takes back mortgages are a sort of mortgage in which the property’s seller also serves as the lender. This sort of mortgage requires the seller to act as the lender and own the home outright. In the event that the borrower defaults on the loan, he or she will make regular payments to the seller while using the home as collateral. 

• Rent-to-Own Agreements

Rent-to-own agreements can be made between a landlord and a rent-to-own company. The borrower rents a home with the agreement that a portion of the monthly rent payments will be placed aside to be utilized as a down payment when the property is purchased later. Rent-to-own arrangements allow borrowers to acquire the property at any moment during the lease period or at the end of the lease term.  

How to Find an Alternative Mortgage Lender in Canada?

Finding an alternate mortgage lender is just like finding a prime mortgage lender. Because alternative lenders provide various mortgage options with their own terms and conditions, you must first determine what you are looking for to ensure that the alternative mortgage lender you choose will help satisfy your funding needs. 

To find the best alternative lender, seek personal recommendations from friends and family, conduct research, read online reviews, or consult a mortgage broker who can provide specialized guidance and assist you evaluate which solution will work best for you.

Satbir Bhullar Mortgages is your first choice mortgage broker in Surrey assisting potential borrowers in securing a competitive mortgage deal at the lowest rate possible. Whether you are looking for a residential mortgage or planning a mortgage refinance in Surrey, we are here to assist you. Feel free to discuss your mortgage needs to get started.