A lot of homeowners can't get mortgages the regular way (from banks and traditional lending institutions) and need a non-traditional mortgage financing or alternative mortgages. And when all other lenders turn them away they have no choice but to go to alternate lenders. Your mortgage brokers can help put you in touch with these alternate lenders (non traditional or B-lenders) who offer mortgage solutions which are different from traditional lenders. Their solutions may include:
Credit history tolerance: If your credit history is not impressive the non-traditional lenders reserve their lowest rates for such people. They may even consider giving you a mortgage if your credit score is 500 or lower, something traditional lenders will not entertain at all.
Acceptable of various forms of income: B-lenders are much more flexible as they are receptive to income sources which traditional lenders do not and cannot consider. Commission income, tips and contributory income from spouses, AirBnB income, are some of the sources which alternative lenders can consider as against traditional lenders. Though the type of income they want to or can entertain depends on lender to lender.
You may wonder if alternative lending is as attractive as it looks or is there a catch to it? The difference lies in a couple of things including the interest rates which may be higher in alternative lending due to an increased risk they are taking by giving you a mortgage. This rate could be anywhere between 2.74 per cent to 5.99 per cent. Alternate lenders may also charge you a small fee which known as lender fees. You would also be expected to pay a brokerage fee as the mortgage term is shorter and work is more. The actual amount if this fee may vary from lender to lender though it vastly depends on a couple of things such as the complexity of funding your mortgage, the experience of the broker, and even the size of the mortgage. In case of traditional lenders, this brokerage fee is usually paid by the lender to the broker without charging the borrower anything.
Some other fees may also be required to be paid by you such as that for the appraisal, the solicitor and the title insurance. Lenders may also charge borrowers a maintenance fee which has to be paid annually and this figure could run into a couple of hundred dollars.
Most borrowers wonder if alternate lenders are safe. Most alternate lenders are safe and borrowers have nothing to worry about. They come in handy in the mortgage market where banks and other traditional lenders cannot offer mortgage loans to those in need. There may also be a time when alternate lenders are of no help to your situation. People usually turn to private mortgages in such cases, which your mortgage broker should be able to arrange for you.
If you are looking to take an alternative mortgage for some reason and have a doubt or question, do get in touch with LendX.