Everyone wants a low-interest rate and a quality mortgage product they can feel good about. With access to over 57 different lenders, we are confident that we can provide a great Grade A mortgage to our clients who qualify. These mortgages are our top products and we are proud to be able to offer them to our qualifying clients.
Mortgage professionals usually refer to lending tiers as ‘A’ lender mortgage and Alternative lender mortgage. It is easy to become confused by different terminology and indeed some people are not aware that there are different types of lenders.
An A lender mortgage is what most people are familiar with because it is the type of mortgage that traditional banks provide. These mortgages have stricter criteria such as a good credit score and income that qualifies based on the loan to value of the property. They do have better rates but also utilize the 2% “stress” test, a test scenario to check if you would be able to afford the mortgage at a higher interest rate (the higher of your interest rate + 2% or the benchmark test rate) for that qualification. They have the ability to require a down payment as low as 5% if an insurer such as CMHC will insure the mortgage.
Alternative lenders have higher interest rates but they do not have as stringent requirements around credit scores and they usually accommodate different kinds of income such as self-employed, commission income, new to Canada etc. These categories of clients may not have the strong credit that an A lender requires. The minimum down payment is also higher.
Due to variables in the lending practices of Alternative lenders, it is imperative that the client is aware of the way the mortgage is calculated and informed of all costs involved. This is where a mortgage expert is a valuable asset in assessing your personal needs and sourcing the lender that will be best suited to those needs.
An A lender requires higher credit scores but provides lower interest rates and can also offer a mortgage with a lower down payment if it qualifies with an insurer. They do use the stress test of 2% added to the interest rate. Clients with low credit and insufficient income or down payment will be refused by an A lender.
An Alternative lender has more latitude around credit, income etc., but do require at least 20% down, have somewhat higher interest rates and can charge fees. They also have more flexibility around the stress test.
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