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Through insurance requirements, a stress-test, and other tightening measures have already put a squeeze on borrowers. The OSFI (Office of the Superintendent of Financial Institutions) has just completed its review of its latest iteration of changes to the Guideline B-20 − Residential Mortgage Underwriting Practices on October 17th. This guideline underwrites rules and requirements for all federally regulated lenders.

The new-stress test alone is often touted to have the capacity to reduce qualifying applicants by up to 10%. A claim we will only be able to verify once it comes into effect next January. One thing that is for sure is that more and more potential borrowers are considering, and turning to, alternative options as a result of being disqualified by traditional lenders.

Alternative lenders | What are the options?

Since lending institutions are either regulated by the OSFI or not, your options basically fall into two broad categories: Federally regulated institutions such as banks or non-regulated lenders, often referred to as “private lenders”.

As you can imagine, because they are not as tightly regulated by federal institutions, they can vary dramatically in the products they offer as well as the investments they are willing to make, qualifying criteria for new borrowers, and the terms they offer.

Syndicate mortgages, credit unions, and private lenders such as mortgage investment corporations are just some of the types of lenders available in this broad spectrum. Their tangible differences in the way they operate and how they fund their loans or investments is where they differ most.

For example, MIC’s choose whether a loan and borrower satisfy their requirements and profit goals and offer investment opportunities to others in their portfolio as a single package that is the same for all investors who they pay out to based on their shares.

A mortgage syndicate actually provides investors with a list of available opportunities that they can then pick and choose from to invest indirectly.

As of now, private mortgages make up 10% of the total number of mortgages in Canada. Though the fact that they often give out much smaller loans over shorter terms mean that they only make up 6% of the actual total value of residential mortgages.

They are not only attractive because of tightening lending criteria at traditional financial institutions. They are also usually quicker, have shorter terms, and sometimes rely more on the potential returns of the investment than the credit history of the applicant.

However, their growth is stymied by the fact that their interest rates are extremely high at 10% compared to the 3-4% at banks. For this reason and because they are associated with more consumer risk, they are unlikely to have a massive growth spurt anytime soon.

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Certified Mortgage Brokers
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Afton Jaskolski
2020-12-30

Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!

Davin Mills
2020-12-26

There are a lot of mortgage brokers in toronto to choose from, I was a bit intimidated by that. Don't regret I picked CMB, they took the lead and made sure to cover all the bases

Tracy Wilhoite
2020-11-21

I was renting an apartment for a long time and finally decided to take a big step - get a mortgage instead. Team at certified Mortgage Brokers laid out various options for me. The actual process went smooth and quick, happy with my new home.

Ryder Turcotte
2020-11-16

My wife and I decided to refinance our mortgage and started looking for a mortgage broker in Toronto. There were so many options, so you can imagine how overwhelmed we got! After talking to Leon we decided to proceed with Certified, didn't regret that decision once. They always gave useful recommendations, were attentive, and constantly in touch. And most importantly (for us) they helped us to save some money!!

Lucy Zimmerman
2020-11-11

Vita was great. Helped my son with all the paperwork and got him very good interest rate. On the closing date called to follow up if everything went fine. Quite a pleasant experience. I would recommend this firm for anyone who is looking a mortgage broker.

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