Welcome to the February issue of my monthly newsletter!
The ABCs of
Most homebuyers want the best mortgage rate possible. That usually means turning to either the big banks, credit unions, or monoline lenders. In the mortgage business, these lenders a typically called “A” lenders. If you’ve got good credit, a good job and decent down payment, you’re probably looking at one of these A lenders. However, there are some people who don’t fit into conventional lending. That’s where you might hear the term Alt-A, or alternative lender. With the addition of tougher mortgage rules and stress tests, more people are turning to an alternative lender out of necessity.
What's an alternative lender?
What’s an alternative lender? An alternative lender is a mortgage company offering mortgage financing with different guidelines on credit and debt servicing. These lenders are backed by investors. They will focus more on the property and exit strategy. If someone has enough equity, there’s always a lender who can assist with financing.
Alternative lenders are typically there for people coming out of a bankruptcy, with bruised credit. Those who are self-employed and need to prove some sort of cash flow also use these type of lenders.
Borrowers will generally need to have a minimum of 20 to 25 percent down. In addition, there will be applicable lender and broker fees. Rates will be higher than conventional lenders, but the rates may not be as high as you think. Some Alt-A lenders are offering one-year rates between 4.35 and 5.8 percent. And using an Alt-A lender can be a great stepping stone to getting back into a conventional mortgage with the best-discounted rate and no fees.
If you find yourself on the outside of conventional lending, a well-qualified mortgage professional can help you navigate the alternative lending space to help you get the best product that fits your needs.
Qualified to make
sure you qualify
If you need open-heart surgery, you want to be sure the doctor in the operating room knows what they’re doing. You want to know they’ve got the professional education, skills and experience to carry out the life-saving procedure.
You would expect nothing less from the person handling the biggest financial decision of your life - your mortgage broker.
Though a mortgage broker doesn’t need quite the same qualifications as a heart surgeon, there are still rigorous standards each mortgage professional must meet to do their job.
While regulations can vary in each province, mortgage professionals need to be registered with a government body. They must be licensed to carry out broker activities.
First, each broker must complete a provincially approved course for mortgage brokering. These courses are offered through various colleges and institutions and can take days or months to complete. In Ontario, for instance, after completing the course, aspiring brokers need to be hired by a Financial Services Commission of Ontario licensed brokerage. The brokerage applies to the commission for that particular broker’s licence.
Consumers can take comfort in knowing that their mortgage broker has gone through a rigorous screening process before they have any contact with them. The standards in place are also good at weeding out people in the industry.
There are a number of online resources available to the public through the various licensing agencies. Don’t be afraid to ask your mortgage broker about their background. They’ll be more than proud to share with you their qualifications.
Much like car insurance, the higher the deductible you choose, the lower the annual premiums will be on your home insurance. But the problem with selecting a high deductible is that smaller claims/problems such as broken windows or damaged sheetrock from a leaky pipe, which will typically cost only a few hundred dollars to fix, will most likely be absorbed by you as the homeowner.
DID YOU KNOW...
Now is the perfect time of year for a free mortgage check-up. Spring is on its way and interest rates are still hovering near historic lows. It makes sense for us to revisit your mortgage and ensure it still meets your needs.
Perhaps you’ve been thinking about refinancing to consolidate debt, purchasing a rental or vacation property, or you simply want to take a vacation. Whatever your needs, we can evaluate your situation and help you determine what’s right for you.