As most of us know, Banks, Credit Unions, Trust Companies and even Insurance Companies offer great discounted mortgage rates and wonderful products but only IF you can actually qualify for them. What does it take to qualify for this type of Discounted Mortgage, also known as an “A” or “Prime” Mortgage? You must be able to afford the mortgage based on the Bank of Canada’s Qualifying Rate, also referred to as the Benchmark Qualifying Rate. Today’s Qualifying Benchmark Rate is 5.19%. What does this mean? It means that despite your contractual discounted rate your bank, credit union, trust company or insurance company is giving you, you MUST qualify within the affordability calculations using the 5.19% rate for a High-Ratio Mortgage or the greater of the Qualifying Benchmark Rate or your Contract Rate Plus 2% if you are seeking a conventional mortgage. A conventional mortgage is when you are financing 80% or less of the property’s approved value. It is becoming more and more difficult for Canadians to qualify for a Prime Mortgage and this is why the Mortgage and Real Estate Industries are continuing to petition the Federal Government to change the Mortgage Qualifying requirements. Canadians may qualify for their mortgage when using the actual mortgage contract rate but are turned away once the Qualifying Benchmark Rate is used.

When the Banks tell you NO; What do you do then?

There is a crack in the Banks, Credit Unions, Trust and Insurance Companies so Canadians need to be aware of what other options are out there when they decline your mortgage request. Most of these lenders do not offer the ability to seek alternative types of financing but Licensed Mortgage Professions most certainly do. A Licensed Mortgage Professional has access to numerous other lenders who make up the Alternative Mortgage Market, also known as “B” Lending. These lenders offer much more flexibility with their clients and the qualifying requirements to get Canadians into their Dream Home, Buy that rental property or use their existing equity to consolidate debt, do a renovation among other things where a mortgage is needed. Alternative Mortgage Lending offers numerous benefits to Canadians so they can secure their desired financing. Such examples are:

• Expanded Debt Service Ratios
• Willingness to accommodate damaged credit history and lower credit scores
• Ability to accommodate a wider variety of income forms (BFS, Tips, Commission, etc)

Naturally, these alternative type of lenders are working with higher risk type of financing so they quite often charge a fee for the mortgage. This also exists with the broker you are working with. Alternative Lending can involve more work to complete the mortgage, a different skill set is required from the broker and there are usually more requirements needed by the lender such as an appraisal. Though the rates are not discounted, Alternative Lenders tend to charge interest that is based around their posted interest rates and their assessment of the risk the mortgage may bring. Many of these aspects can be discussed prior to your broker submitting your mortgage application and is always disclosed upfront with the Conditional Mortgage Approval your broker receives from the lender.

There are times when Alternative Lenders cannot fill the void left by the Prime Lenders saying No and a mortgage broker, once again, can access the Private Mortgage Markets to find a different type of lender who will fulfill the mortgage request.

The key to maximizing the efficiency of your time, money and energy, is to connect with a Licensed Mortgage Professional right out of the gate so that they can properly assess your financial position and provide the correct feedback on what lender market you will fit in and explain the applicable expectations and overview of that market. Taking this step is the best one for any Canadian as the mortgage professional is the expert in the field with access to ALL three mortgage markets that the banks, credit unions, trust companies and insurance companies rarely have the ability to offer. Now, not all Licensed Mortgage Professionals offer or are properly versed in the Alternative and Private Mortgage Markets so ensure you connect with one that is as it can certainly save you time and money.

It continues to be tough out there to secure mortgage financing in the Prime Market so make sure you have a Plan B in place or know where to explore it if you need one. There are numerous options still available if Prime Lenders have said NO to your mortgage financing.