So you’re looking to buy real estate in Ottawa, but for any number of reasons, you’re unable to get a traditional mortgage from a bank, credit union, or trust. What to do?
Just because you’ve been turned down by “A” lenders doesn’t mean you’re out of luck as far as a mortgage is concerned. This is where alternative lenders come in. Thanks in part to a hot real estate market, there are plenty of alternative mortgage lenders in Ottawa and the surrounding area who can help you get a mortgage on the property of your dreams — even if you don’t qualify for a bank mortgage.
What is an Alternative Mortgage Lender?
An alternative mortgage lender can be any mortgage lender that isn’t a bank, credit union, or trust company. While the aforementioned financial entities are usually federally or provincially regulated, alternative lenders aren’t held to the same regulations and therefore have a bit more flexibility concerning who they can lend money to.
An alternative lender can be any of the following:
An individual is just one person — a private lender who chooses to invest their personal capital into property. If you get a mortgage from an individual lender, all the loan capital comes from a single source.
A mortgage syndicate is a small group of private investors who collaborate to invest in several properties at once. In a syndicate, the investors pool their money to fund a mortgage, though each investor can pick and choose which mortgages they want to fund. A mortgage from a syndicate, therefore, will be funded from a small handful of sources.
Mortgage Investment Corporation (MIC)
An MIC is similar to a syndicate, but bigger. A larger number of private investors contributes to a pool of capital that is then distributed evenly across numerous mortgages and property investments. In an MIC, individual investors don’t get as much of a say in which properties are mortgaged, though the MIC will still have to collectively evaluate you and your property to determine if you’re a good fit for a loan.
All of these types of alternative lenders can be approached directly, or through a mortgage broker. If you’re not sure which type of lender can provide you with the mortgage you need, approaching a mortgage broker first can be faster and more efficient than booking separate appointments with several different lenders.
How Can an Alternative Mortgage Lender Help You?
As the name might suggest, alternative mortgage lenders can provide an alternative loan source if you’re unable to get a traditional mortgage from a bank.
Banks have to follow strict federal regulations around who they can and cannot lend to — while these regulations are in place to prevent vulnerable borrowers from taking on a loan that could cripple them financially, the same regulations often mean that people who could reasonably afford a mortgage are unable to get one for various reasons. These reasons can include being self-employed or having variable income; having bad credit from previous debts that are now resolved; or even just being young or new to the country, without much financial history.
While banks and credit unions look closely at your credit history, current income and employment situation when evaluating your suitability for a mortgage, alternative mortgage lenders look primarily at the value of the property. As long as your property has a good appraised value and at least 20 percent available equity, you’ll probably be able to find a mortgage lender that can offer you what you need — even if you have bad credit or irregular income.
How Do You Choose an Alternative Mortgage Lender?
With so many options, picking an alternative lender in Ottawa can be daunting. Luckily, knowledgeable mortgage brokers are here to help. Through a mortgage broker like the ones at Mortgage Broker Store, you can quickly explore options from a range of different lenders, and connect with a lender that suits your financial needs and the property you want to mortgage.
Mortgages from alternative lenders tend to be shorter and smaller than traditional bank mortgages, however, they also tend to carry higher interest rates — a measure that helps protect the lenders from the higher inherent risk of these loans. Though a mortgage broker will work with you to evaluate your situation and your eligibility for certain types of loans, in the end it’s up to you to maintain a good standing with your lender and make payments on time to avoid power of sale.