Which Lender Is Right For You?
Which Lender is right for you? The following is a summary of the choices available for clients when looking at the four different types of lending groups. Which one is best will all depend on who you are as a borrower, what your current situation is now, and what your situation will look like in the future.
Big Banks
Big Banks are especially appealing to first-time home buyers as it offers a sense of comfort knowing your mortgage is being dealt with by a nationally recognized financial institution. Let’s review TD and Scotiabank. TD offers very fast review of documents with the ability for collateral charges, multiple branch locations, and competitive privileges such as pre-payment abilities. Scotiabank is also an advantageous option for home owners as they have one of the most comprehensive and easy-to-use home equity lines of credit. Being able to access a home equity line of credit (HELOC) and roll it into your mortgage offers simplicity and efficient methods of borrowing for home owners.
The draw back with both banks is that they are in fact chartered banks. When a client decides to use them for a fixed rate mortgage, specifically the 5-year term, they can potentially be on the hook for large penalties for breaking their mortgage early. There are many reasons why someone may need to break their mortgage early and this can make being in a long term fixed rate mortgage with a chartered bank unpleasant.
Credit Unions
One of the biggest benefits of Credit Unions, such as Westminster Savings or Coast Capital to name a few, is they are not federally regulated, they are provincially regulated. They are not required to adopt federal mortgage rule changes unless they want to. This can be an extreme benefit to those considering rental properties, those with unique income/employment situations, or complex transactions that chartered banks do not or cannot work with.
Some of the negative attributes are, a reputation for slow review times of documents and mortgage applications, as well as portability. If you work for a company or in an industry that is known for relocation and re-assignment across provinces, you will pay a penalty to a Credit Union every time. This is something that is likely not to happen when working with Charted Banks or Monoline Lenders as they will have more flexibility in allowing you to port your mortgage to a new property in other provinces.
Monoline Lenders
Monoline Lenders are supported by mortgage brokers, and in turn, mortgage brokers are supported by Monoline Lenders. You cannot access mortgage products that a Monoline Lender offers without using a mortgage broker, as they typically do not have physical branches or locations. They are funded by private investors dealing only in mortgage transactions, allowing their products to be more customized based on the investors’ risk tolerance. They can offer extremely low interest rates, very competitive privileges with pre-payment and portability, fast turnaround-times, and the best part, significantly lower penalties for breaking a mortgage. This is highly advantageous to someone who wants the security of a long term fixed rate, but isn’t 100% certain they will be carrying out their mortgage at the property for the full five years.
The disadvantages is the almost blind trust a client must have. These Monoline Lenders do not have much brand recognition with the public, they have limited direct access, and usually do not have any physical locations to visit. This makes it hard for some people to feel comfortable using them as their mortgage provider.
Private Lenders
The benefit of a Private Lender is that anyone who has inconsistent income, unique properties, poor credit history or any type of severe risk in their application, can get an approval. When a Chartered Bank says no, a Credit Union says no, and a Monoline Lenders says no, a Private Lender can say yes.
The disadvantage is your interest rate is going to be significantly higher and the privileges such prepayment and portability are going to be significantly less. As well, with most lenders, they will pay the mortgage brokers commission themselves. In this case, you the borrower will be paying a fee to the broker.
How Client First Mortgage Solutions Can Help You
This information is extremely powerful to you as a home buyer and even as a current home owner. We will help you Build a plan to move into your dream home. Which lender is right for you? We can help you answer that question too. After getting to know you and your financial situation, we can help you choose what makes sense for you. Contact Client First Mortgage Solutions today.
Original Article – Dominion Lending Centres – February 5, 2018
