Alternative Mortgages

Why an Alternative Mortgage?

Sometimes people are refused a mortgage by a traditional bank, so they give up on the dream of home ownership, not knowing that there are lenders who provide mortgage under different guidelines and these mortgages are just as secure as with a bank. They are known as Alternative mortgages and Mortgage Agents have access to these lenders.

Typically, a low credit score will disqualify a client with traditional banks and “A” or Prime lenders. This is where Alternative lenders come in. The score itself is subjective to the lender, so depending on how low it is, the lender will usually look at other factors around the clients and the property itself. These usually include the following:

Income

There are two types of income that lenders will look at from a client seeking a mortgage.

1. Employment Income, also called proven or confirmable income. You work for an employer and you can provide a Notice of Assessment to verify what you earn.

2. Non – proven or non – confirmable income, used by those who are self-employed ( based on business income ) or are paid through commissions from an employer. This usually involves an averaging of income or estimating income.

Down Payment (when purchasing)

The more down payment you have in relation to the purchase price of the property, shows your ability to save and gives you a higher portion of the risk, lowering the chance of default.

Equity (for refinance)

The more equity you have in your home, the more options you have as to the amount that you can refinance for. This is an excellent way to access funds for renovations, investing etc. The lender has a maximum loan to value that they are willing to lend on, so equity is appealing.

Value and condition of the property

An appraisal will confirm the value and condition of the property and will be the final value used by the lender.

If you don’t qualify for an “A” or Prime mortgage, alternative lenders may be your answer. Interest rates will be higher and fees may be incurred but for many people it is worth it to get on the property ladder or if they need to refinance their property.