Best Mortgage Online helps your homeownership journey easier with flexible alternative mortgage options. Secure the financing you need through our personalized solutions.
What is Alternative Lending?
Alternative lending provides mortgage solutions for borrowers who do not meet the strict qualification criteria required by mainstream lenders like the major banks. Alternative lenders include smaller banks, credit unions, mortgage finance companies, mortgage investment corporations (MICs), and private lenders.
These lenders offer more flexible mortgage options for borrowers with challenging financial situations, such as having high debt, low income, poor credit history, or irregular income sources.
| Pros | Cons |
|---|---|
| – More flexible qualifying criteria – Faster mortgage approvals – Financing options like interest-only payments – Allows more property options | – Shorter mortgage terms – Higher interest rates and fees – Limited renewal and refinancing options – Less strictly regulated than banks |
Why Your Mortgage Declined by Big Banks in Canada?
Many Canadians may struggle to qualify for a mortgage from one of the big banks, such as RBC, TD, Scotiabank, CIBC, BMO, or National Bank. Here are the top there reasons borrowers are being declined:
Poor credit score: Most major banks require a minimum credit score of 680. However, the average Canadian score is declining.
High debt levels: To qualify for an insured mortgage in 2024, your Gross Debt Service (GDS) ratio should be 32% or lower, and your Total Debt Service (TDS) ratio should not exceed 40%. With the rising cost of living, many Canadians carry high debt burdens.
Irregular income sources: The self-employed, contract workers and commission-based earners can have difficulty providing stable income with the documents traditional lenders require.
What Do Alternative Mortgage Lenders Can Help?
As borrowing criteria from Big banks make it harder to qualify for a traditional mortgage, many Canadians are turning to alternative lending options. Alternative mortgage lenders cater to borrowers who, for various reasons, do not meet the qualifications required by prime lenders. They help borrowers by:
- Consider borrowers’ financial situation, equity position, credit scores, and debt ratios. They can help bridge gaps when borrowers don’t quite meet traditional qualification standards but can make mortgage payments.
- Provide customized solutions for unique financial situations that don’t fit neatly into a one-size-fits-all lending model.
- Give borrowers a chance to improve their finances and potentially qualify for lower rates.
What’s your option on Alternative Mortgages?
Alternative lenders offer a variety of specialized mortgage solutions to suit different needs and situations.
Home Equity Loan
Our private lenders can approve you based on your home’s equity, not just your income or credit score. Unlock funds through a home equity loan secured against your property.
Second Mortgage
A second mortgage leverages your built-up home equity to borrow additional funds beyond your existing first mortgage. It provides access to cash without having to refinance.
Bad Credit Mortgage
Bad credit or low credit scores won’t necessarily stop you from getting a mortgage with alternative lenders. Alternative lenders offer bad credit mortgages focused on your equity rather than your credit report.
B-Lenders Mortgage
B-lenders offer a middle ground between banks and private lenders, with rates somewhere in between. Their mortgages provide an alternative to traditional lenders if you don’t qualify for an A-lender mortgage.
B-Lenders Mortgage
Bridge Loan
If you need to purchase a new home before selling your existing one, a bridge mortgage provides short-term financing to cover the down payment on your new property. It bridges the gap until you complete the sale.
Foreclosure Mortgage
Want to avoid foreclosure? Alternative lenders offer mortgage solutions, allowing you to borrow against your home equity and stop foreclosure. Get approved quickly and keep your home.
Foreclosure Mortgage
Debt Consolidation
Consolidate higher-interest debts like credit cards into your mortgage to save on interest charges and improve your cash flow. Alternative lenders can assist with debt consolidation mortgages when banks won’t.
Debt Consolidation
Self-employed Mortgage
Alternative lenders understand self-employed borrowers and retirees. No-income verification mortgages allow you to qualify based on your home equity without having to document your current employment income.
Self-employed Mortgage
Vacation Home Mortgage
Dream of owning a vacation property? Alternative lenders provide financing options for vacation homes, waterfront properties, cabins and other recreational real estate.
Vacation Home Mortgage
Cottage Home Mortgage
Cottages can make for a relaxing getaway but also a challenging mortgage approval. Alternative lending offers solutions for financing cottages even with lower usage and rental income.
Cottage Home Mortgage
Investment Mortgage
Real estate investors like the flexibility of alternative lending qualification guidelines for financing investment properties, such as rental units and Airbnbs.
Investment Mortgage
Bank Turn-Down Mortgage
If your bank has declined you, alternative lenders can provide mortgage approval using more customizable qualification criteria instead of one-size-fits-all standards.
Bank Turn-Down Mortgage
Vendor Take Back (VTB) Mortgage
When the seller acts as a lender and carries back financing, a VTB mortgage allows tailored mortgage terms negotiated between seller and buyer beyond traditional lender constraints.
Vendor Take Back Mortgage
Who are Alternative Mortgage Lenders in Canada?
There are a wide variety of alternative lending options available from 3 different types of mortgage providers in Canada:
Private Mortgage Lenders
Private lenders include investment firms, companies, or individuals who lend their capital.
Pros: Quick approvals, can lend to higher risk borrowers, focus on equity over income
Cons: Higher rates and fees, shorter terms
Qualifying Criteria: Based primarily on equity, not credit scores or income
Examples: River Rock, Alta West, Fisgard, MCAP, CMLS
B Lenders
Smaller financial institutions lend to borrowers who do not meet traditional bank criteria.
Pros: More affordable than private lenders, longer terms
Cons: Still higher rates than banks, need minimum credit score
Qualifying Criteria: Minimum credit score around 600, GDS/TDS limits
Examples: MCAP, First National, CMLS, Home Trust
Credit Unions
Member-owned financial co-operatives offering mortgages.
Pros: Competitive rates, member benefits
Cons: Limited to members, strict qualifying
Qualifying Criteria: Similar to major banks
Examples: First Calgary, Coast Capital, Prospera, Steinbach
This table summarizes average rates and qualifying criteria for major alternative lending categories:
| Lender Type | Avg. Rates | Qualifying Factors |
|---|---|---|
| Private | 8-15% | Primarily equity |
| B Lenders | 5-8% | Credit, income, GDS/TDS |
| Credit Unions | 3-5% | Similar to banks |
Finding your Best Alternative Mortgage Lender
Finding the right lender for your needs can be challenging with so many alternative lending options. Here are 2 tips on choosing the best provider:
Ask these key questions
- What are all the costs and fees associated with this mortgage?
- What loan amounts and amortization terms do you offer?
- How long is your approval process?
- What specific criteria do you use to approve borrowers?
Compare interest rates and terms
Look beyond just interest rates and also consider terms like:
- Loan amount limits
- Prepayment privileges
- Early renewal options
- Portability to another property
Ready to Explore Alternative Mortgages? Let us help!
Alternative lending provides mortgage solutions when traditional banks say no. If you need flexible financing to achieve your homeownership goals, Best Mortgage Online can help. Our mortgage advisors will find the perfect alternative lender suited to your unique financial situation.
See if you qualify today!
FAQs
Can I get an alternative mortgage to buy my first home?
Yes, alternative mortgages are an option for first-time home buyers who don't meet bank requirements and need more flexible qualifying.
How fast can I get approved for an alternative mortgage?
Many alternative lenders advertise approvals within 24-48 hours once they receive a complete application, much faster than banks.
Are alternative mortgages insured or uninsured?
Alternative mortgages can be either insured or uninsured. B lenders tend to offer insured mortgages, while private mortgages are often uninsured.
Can I renew my existing mortgage with an alternative lender?
Yes, you can choose to renew with an alternative lender at maturity, even if your original mortgage was from a traditional bank.
How do I choose the best alternative mortgage lender?
The best lender depends on your needs. Work with a broker who can compare options from multiple lenders and find the right fit.
Can alternative lenders help if I have bad credit?
Yes, alternative lenders are an option for getting a mortgage approved with bad credit, as they focus more on your equity.
How do alternative lenders assess self-employed income?
They may use different formulas, like averaging previous years' income, to determine what you can qualify for based on self-employment income.