What is Alternate
Lending?

B Lender’s will examine each mortgage on a case by case basis and approve files that cannot be approved with an A Lender. There are criteria that you will be required to meet, but they examine the file as a whole and are willing to understand the “why” behind things such as low reporting income or challenging credit. They see past the “face value” of a file, which allows more leeway for you, the borrower, and increases the likelihood of you qualifying for a mortgage.

The key considerations for those looking at B lending as an option include:

• Down Payment must be minimum 20-25% of purchase price
• Applicable lender/broker fees based on the loan amount
• Interest rates will be higher than those working with an A lender
• B Lending can be a short-term option to set you up for a future, more conventional mortgage.
• There are great options for pre-payment, but understand the penalties associated with it.

You can learn more about B lending and it’s options by visiting our B Lending Page.

If A lending and B lending is not an option, there is still an additional option of using private lending. Who will private lending be an option for? This is a good option for those who:

• Are interested in purchasing an unconventional property that a prime lender or bank won’t finance.
• Are interested in being approved quickly
• Have damaged credit
• Only require a short-term loan for the property

Have income that is non-conformable, which is leading to you not being able to obtain traditional mortgage financing.

Private Lending is essentially a short-term, interest-only loan that ranges in length from 1-3 years. By being an “interest-only” loan. It means that the property owners do not have to pay the mortgage principal down, and instead are only required to pay interest payments each month. This type of lending helps individuals who may not fit inside the “conventional” lending box, but are still capable of paying back a loan, to obtain financing on a new purchase or a refinance of a current property.

In addition to the type of financing, private lenders will differ from traditional lending in one major way: They are highly interested in the marketability and resale value of the property being purchased. The mortgaged property must be in good condition and will have to undergo an appraisal by the lender’s chosen appraiser. A Private Lender wants to ensure that their investment is protected should you default on the loan payments and be required to sell the property.

Due to the nature of private/alternative lending, it is a high-risk option for the lender to take on. This translates into much higher interest for the borrower. These vary from lender to lender and it is best to work with your mortgage broker to determine what they will look like. Also, with private lending there is commonly a broker’s fee and legal costs. These will vary but will range between 1-6% of the loan amount.

Just as with B Lending options, Private Lending can act as a stepping stone to help property owners move towards more conventional lending options. It can be a good solution for those who would not normally qualify for a conventional mortgage. You can learn more about private lending in our free eBook too!

We know that Alternate Lending can be confusing, but we have over 28 years of experience working with clients, many of which have utilized Alternative Lending options. We encourage you to reach out to us if you have any questions regarding Alternative Lending, or you can also click below to use our fast, easy and convenient mortgage application.