Mortgage Lending Solutions
Getting access to cheap money in our current lending environment is not easy and lenders today often look for reasons not to do a deal. This can be very frustrating and can often lead to lengthy delays and expenses. With interest rates on the rise, it becomes even more important to consider your options. Below is a quick review of the many ways to borrow the funds you need and save money and time.
Prime rate mortgages: Banks, Credit Unions and Monolines dominate this category. All of these lenders can offer different rates at different times and it can often mean a difference of up to 70 basis points in the rate. This can make a huge difference in the cost of interest. Many of these lenders sell the benefits of their products, but at the end of the day, it money in your pocket that matters. Banks will never tell you about another lender’s rates; unless it’s worse than theirs, but mortgage brokers will do so. Prime rate mortgage have also become more complicated with the new lending rules. An insured mortgage, high ratio mortgage and conventional mortgages are all offered at different rates. It’s hard to believe, but someone buying a home with 10% down payment can secure a better rate than someone putting 35% down.
Line of credit mortgages: Currently the prime lending rate charged by most lenders is 3.70%. Your mortgage line of credit rate is set based on the prime rate and many clients are being charged as high at 4.70% (Prime plus 1%). Lines of credits can offer lots of great benefits, but when you compare this to a variable rate which is being offered as low as 2.70% and the rate savings is very obvious.
Alternative mortgages: These mortgages normally fall into two categories of Subprime and Private financing.
- Subprime mortgages are offered by lenders other than the banks and credit unions. They usually require significant paperwork; have a rate much higher than prime lenders and fees are normally applied. They can be slow and tedious to complete. They are usually a good solution for borrowers with tainted credit history or business for self-clients requiring flexible income verification.
- Private financing can be done with minimal questions and paperwork. You can obtain a commitment within 24 hours and are quick to complete. Rates are higher than the subprime deals, but not much greater. In some cases you can access up to 95% of the properties equity.
Rate update: The Bank of Canada will announce rates again on Sept 5th and they are expected to increase rates. Customers should now consider locking into a fixed rate.
- Variable rate (uninsured): 3.20%
- Variable rate (insured): 2.70%
- 5 year fixed rate (uninsured): 3.64%
- 5 year fixed rate (insured): 3.34%