Getting a mortgage from a bank has become a bit more challenging, especially for those who are self-employed or have some credit challenges – whether the challenge is the result of a bankruptcy or some other life circumstance.

With the introduction of new mortgage rules this year, the Bank’s have tightened its guidelines to certain types of clients, and for one reason or another your situation may no longer fit with the new guidelines.

The new mortgage rules have also had an impact on those who want to refinance their mortgage loan. And at renewal time, if you want to increase your existing loan, change your amortization or shop for a better rate, the rules may have an impact as well.

However a bank is not the only option for a mortgage – there is now a growing group of alternative or private lenders who are flexible and open to reviewing a variety of situations. While many consumers, including investors, consider private lenders their last resort, the new mortgage rules have created an opportunity for a variety of specialized lenders to enter the market.

Consider these scenarios:

  • Penalties can be high to break an existing mortgage. You opted for a fixed rate and you’re two years into the mortgage and rates have come down substantially. You want to break your mortgage and get a new one but the penalties are high.
  • New ratios will impact your ability to get approved. The mortgage rules changed the qualifying ratios that traditional lenders use. So, if you are carrying a high debt load, then you may not qualify.
  • Rules for home equity lines of credit (HELOCS have changed dramatically. No longer can you borrow up to 80% loan-to-value (LTV). The max amount you can access as a revolving line is 65%LTV.
  • Thinking about refinancing to consolidate debt? Think again. Your insured mortgage can’t be more than 80 % LTV. If you don’t have a lot of equity yet, it may not happen.

Despite the challenges, there are solutions. Changes in the lending market have led to a growing pool of mortgage funds from private lenders. These lenders are not limited to private individuals with money to lend, either individually or as part of an investment pool. While mortgage brokers still have access to trust companies that specialize in alternative lending, the market is also seeing an increase in the number of Mortgage Investment Corporations (MICs) as well as smaller lenders who are now offering specialized lending products to fill the gap.

Many private lenders put more weight on the equity in a property, rather than on the work you do or on the credit challenges you have.  The downside can be higher interest rates and lending fees.

Smaller institutional lenders, however, are offering specialized lending with affordable interest rates, reasonable lending fees and flexible underwriting.

A few benefits of specialized lending:

  • Quick closings: The key to a quick close is having your financing set up quickly — specialized lending can make that happen.
  • Terms of the loan: These loans are for short periods of time, usually no more than two or three years, which gives you time to get into a position to qualify with a conforming lender.
  • Great for investors: Because specialized lenders have flexibility, they will look at those fixer-upper rental properties with a keen eye and may fund both the purchase and the home improvements.
  • Diverse repayment options: This is especially helpful for entrepreneurs. Payments can be structured more creatively and may include interest-only payments and balloon payments at the end of the term or on closing of a sale.
  • Construction financing: Bank construction financing can be riddled with red tape. Private lending may get the borrower more money, and quicker access to construction draws, which in the end, could save time and money when building a home.

For more information and to find a lender who will meet your needs, call me today!