Knowledgeable mortgage brokers understand the importance of building relationships with their lender partners. With home sales and prices in Canada on a declining trend since March 2022, brokers would be wise to establish, or fortify existing relationships with private lenders to assist as many borrowers as possible get the financing they need. With the economic downturn after the COVID-19 pandemic, including rapidly rising interest rates, the cost of borrowing money is increasing, and qualifying for traditional financing is getting harder. As a result, prospective home buyers are looking for more options and more flexibility. Private lenders are able to offer just that: versatile financing alternatives, with common sense pricing and unmatched flexibility in their solutions and services.
Private mortgage lenders like CMI have the power to structure deals to suit clients who may not qualify for financing otherwise. Borrowers with untraditional or unverifiable income, or those with credit issues can still qualify for a private mortgage because these lenders are not governed by the same restrictions as banks and other traditional lenders. Private lending partners can also easily secure funding for clients that are self-employed business owners, newcomers to Canada, or those looking to buy a more rurally-situated property.
Borrowers can also avoid mortgage stress tests entirely with a private mortgage, as the B20 rules that govern traditional lenders often act as a major qualifying barrier for many clients. Even with good credit and the ability to fulfill other mortgage requirements, these rules require borrowers to qualify for a mortgage based on a higher interest rate. If borrowers were to approach a bank for the same mortgage, they’d generally have to reconsider the maximum amount they can afford to spend, as home buyers are qualifying for mortgages that are 10% to 15% lower than before the latest rate increases. Private lenders, on the other hand, take a ‘big picture’ view and consider a range of other factors to approve a client, while still ensuring a prudent lending decision that considers affordability, instead of whether or not the borrower can meet a rigid stress test.
Additionally, many private lenders have prioritized technology and digital solutions, meaning the submission process is seamless and quick. In an uncertain market, an hour or two can make a difference as to whether or not a client’s offer on a property is accepted. The approval process with a traditional lender is not as flexible or efficient and can take weeks. CMI can typically approve a loan application within hours.
The flexibility that private lenders offer can also benefit clients working toward improving their credit. Certain borrowers may consider a private second mortgage to consolidate their high-interest debt such as student loans, lines of credit and outstanding credit card balances, which will likely be affected by the recent interest rate hikes. Most banks don’t offer second mortgages, except in the form of a home equity line of credit. That type of revolving facility is not appropriate for a borrower looking to eliminate debts of this type.
A short-term second mortgage can also provide badly needed funds to bring a first mortgage up to date to avoid foreclosure and keep a borrower in their home. Private lenders can also offer flexible repayment terms like interest-only and prepaid mortgages, which is a vital option for borrowers who have been laid off or are experiencing cash flow challenges. Terms can be customized to provide funds for short-term needs as brief as just a few days, and private lenders will consider deals for clients with challenged credit that prime lenders won’t touch.
Private lenders take a much more common sense approach, which offers much more wiggle room compared to the rigid restrictions that borrowers face at the bank. Lenders like CMI can price deals based on the unique circumstances of each individual client. There’s also less paper work, leading to faster turnaround times and decisions. These factors allow private lenders to provide mortgage brokers with greater flexibility to serve a broad range of clients, and help you close deals faster in a challenging market.
Not all private lenders are equal. Experience the CMI Difference. Learn why we’re the preferred partner of brokers across Canada. Submit your deal today.