Ask Angela
Question: What is the purpose of Private Lenders, if you already have Banks and what you call Mono Lenders?
Answer: Private Lenders are becoming more important in the mortgage world, as the Finance Minister tightens mortgage rules.
Here is a break down of the functions of various mortgage lending institutions:
Banks: some banks will give mortgage brokers lower interest rates for the clients. They have a limited amount of options and products. Clients have to exactly fit with their products. The Bank can only offer their own products, options and services. The bonus when dealing with a bank is that you can have all your banking in one place, ie credit cards, bank accounts, car loans and mortgages. Very Secure
Mono Lenders: Usually on line and limited amounts of offices. Only product is mortgages. Pays commissions to brokers for clients. Low over head. Competition among the many Mono Lenders, keeps interest rates low. Each have their own niche. One may accept lower credit scores while another may have better prepayment options.
Governed by the same rules that all Canadian Banks must follow. Very secure.
Credit Unions: They are community based, so may finance a project that no one else will if they can see the value in improving the community. Credit Unions are based in the community, they will look at funding a mortgage, because they know the community and believe it is non risk, while other lenders in major cities have no idea what the community is like. There motto is 'if it makes sense they will finance it' Great for small town lending, where the other bigger lenders will not lend because of the population limits. Very Secure.
Private Lenders: More and more Canadians are not fitting in with the strict rules for mortgages. Private Lenders are becoming more popular.
There are a multitude of reasons why borrowers seek to obtain financing from private lenders.
These include:
- greater restrictions on traditional bank and trust company lending requirements, such as loans based on land value rather than borrower income;
- borrower’s that have a non-salaried income and do not therefore satisfy financial institutions’ structured lending guidelines;
- urgency to complete a transaction; and
- borrower’s with poor or no credit history rates
- construction loans
As you can see there are many choices to choose from and your mortgage broker narrows down the list, to get you a well planned mortgage that will be truly unique and in the best interests for you.
Always, call a mortgage professional, to get a free no obligation quote. It can only save you money.
Questions or comments-- akroemer@mortgagegroup.com
250-650-4182
