Alternative Lending

Danielle McIntosh • July 31, 2024

Alternative lending refers to any lending practices that fall outside the normal banking channels. Alternative lenders think outside the box and offer solutions to Canadians who wouldn’t otherwise qualify for traditional mortgage financing.


In an ideal world, we’d all qualify for the best mortgage terms available. However, this isn’t the case. Securing the most favourable terms depends on your financial situation. Here are a few circumstances where alternative lending might make sense for you.


Damaged Credit


Bad credit doesn’t disqualify you from mortgage financing. Many alternative lenders look at the strength of your employment, income, and your downpayment or equity to offer you mortgage financing. Credit is important, but it’s not everything, especially if there is a reasonable explanation for the damaged credit.


When dealing with alternative lending, the interest rates will be a little higher than traditional mortgage financing. But if the choice is between buying a property or not, or getting a mortgage or not, having options is a good thing. Alternative lenders provide you with mortgage options. That’s what they do best.


So, if you have damaged credit, consider using an alternative lender to provide you with a short-term mortgage option. This will give you time to establish better credit and secure a mortgage with more favourable terms. Use an alternative lender to bridge that gap!


Self-Employment


If you run your own business, you most likely have considerable write-offs that make sense for tax planning reasons but don’t do so much for your verifiable income. Traditional lenders want to see verifiable income; alternative lenders can be considerably more understanding and offer competitive products.


As interest rates on alternative lending aren’t that far from traditional lending, alternative lending has become the home for most serious self-employed Canadians. While you might pay a little more in interest, oftentimes, that money is saved through corporate structuring and efficient tax planning.


Non-traditional income


Welcome to the new frontier of earning an income.


If you make money through non-traditional employment like Airbnb, tips, commissions, Uber, or Uber eats, alternative lending is more likely to be flexible to your needs.

 

Most traditional lenders want to see a minimum of two years of established income before considering income on a mortgage application. Not always so with alternative lenders, depending on the strength of your overall application.


Expanded Debt-Service Ratios


With the government stress test significantly lessening Canadians' ability to borrow, the alternative lender channel allows expanded debt-service ratios. This can help finance the more expensive and suitable property for responsible individuals.


Traditional lending restricts your GDS and TDS ratios to 35/42 or 39/44, depending on your credit score. However, alternative lenders, depending on the loan-to-value ratio, can be considerably more flexible. The more money you have as a downpayment, the more you’re able to borrow and expand those debt-service guidelines. It’s not the wild west, but it’s certainly more flexible.


Connect anytime


Alternative lending can be a great solution if your financial situation isn’t all that straightforward. The goal of alternative lending is to provide you with options. You can only access alternative lending through the mortgage broker channel.


Please connect anytime if you’d like to discuss mortgage financing and what alternative lending products might suit your needs; it would be a pleasure to work with you.


Danielle McIntosh

Licensed Mortgage Broker

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Bank of Canada Rate Announcement Mar 12th, 2025

By Danielle McIntosh • March 12, 2025
Bank of Canada reduces policy rate by 25 basis points to 2¾% FOR IMMEDIATE RELEASE Media Relations Ottawa, Ontario March 12, 2025 The Bank of Canada today reduced its target for the overnight rate to 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70%. The Canadian economy entered 2025 in a solid position, with inflation close to the 2% target and robust GDP growth. However, heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada. The economic outlook continues to be subject to more-than-usual uncertainty because of the rapidly evolving policy landscape. After a period of solid growth, the US economy looks to have slowed in recent months. US inflation remains slightly above target. Economic growth in the euro zone was modest in late 2024. China’s economy has posted strong gains, supported by government policies. Equity prices have fallen and bond yields have eased on market expectations of weaker North American growth. Oil prices have been volatile and are trading below the assumptions in the Bank’s January Monetary Policy Report (MPR). The Canadian dollar is broadly unchanged against the US dollar but weaker against other currencies. Canada’s economy grew by 2.6% in the fourth quarter of 2024 following upwardly revised growth of 2.2% in the third quarter. This growth path is stronger than was expected at the time of the January MPR. Past cuts to interest rates have boosted economic activity, particularly consumption and housing. However, economic growth in the first quarter of 2025 will likely slow as the intensifying trade conflict weighs on sentiment and activity. Recent surveys suggest a sharp drop in consumer confidence and a slowdown in business spending as companies postpone or cancel investments. The negative impact of slowing domestic demand has been partially offset by a surge in exports in advance of tariffs being imposed. Employment growth strengthened in November through January and the unemployment rate declined to 6.6%. In February, job growth stalled. While past interest rate cuts have boosted demand for labour in recent months, there are warning signs that heightened trade tensions could disrupt the recovery in the jobs market. Meanwhile, wage growth has shown signs of moderation. Inflation remains close to the 2% target. The temporary suspension of the GST/HST lowered some consumer prices, but January’s CPI was slightly firmer than expected at 1.9%. Inflation is expected to increase to about 2½% in March with the end of the tax break. The Bank’s preferred measures of core inflation remain above 2%, mainly because of the persistence of shelter price inflation. Short-term inflation expectations have risen in light of fears about the impact of tariffs on prices. While economic growth has come in stronger than expected, the pervasive uncertainty created by continuously changing US tariff threats is restraining consumers’ spending intentions and businesses’ plans to hire and invest. Against this background, and with inflation close to the 2% target, Governing Council decided to reduce the policy rate by a further 25 basis points. Monetary policy cannot offset the impacts of a trade war. What it can and must do is ensure that higher prices do not lead to ongoing inflation. Governing Council will be carefully assessing the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. The Council will also be closely monitoring inflation expectations. The Bank is committed to maintaining price stability for Canadians. Information note The next scheduled date for announcing the overnight rate target is April 16, 2025. The Bank will publish its next full outlook for the economy and inflation, including risks to the projection, in the MPR at the same time.

Collections Can Prevent Mortgage Financing

By Danielle McIntosh • March 5, 2025
A question that comes up from time to time when discussing mortgage financing is, “If I have collections showing on my credit bureau, will that impact my ability to get a mortgage?” The answer might have a broader implication than what you might think; let's spend a little time discussing it. Collections accounts are reported on your credit bureau when you have a debt that hasn’t been paid as agreed. Now, regardless of the reason for the collection; the collection is a result of delinquency, it’s an account you didn’t realize was in collections, or even if it’s a choice not to pay something because of moral reasons, all open collections will negatively impact your ability to secure new mortgage financing. Delinquency If you’re really late on paying on a loan, credit card, line of credit, or mortgage, and the lender has sent that account to collections, as they consider it a bad debt, this will certainly impact your ability to get new mortgage financing. Look at it this way, why would any lender want to extend new credit to you when you have a known history of not paying your existing debts as agreed? If you happen to be late on your payments and the collection agencies are calling, the best plan would be to deal with the issue head-on. Settle the debts as quickly as possible and work towards establishing your credit. Very few (if any) lenders will even consider your mortgage application with open collections showing on your credit report. If you’re unaware of bad debts It happens a lot more than you’d think; people applying for a mortgage are completely unaware that they have delinquent accounts on their credit report. A common reason for this is that collection agencies are hired simply because the lender can’t reach someone. Here’s an example. Let’s say you’re moving from one province to another for work, you pay the outstanding balance on your utility accounts, change your phone number, and make the move. And while you think you’ve paid the final amount owing, they read your meter, and there is $32 outstanding on your bill. As the utility company has no way of tracking you down, they send that amount to an agency that registers it on your credit report. You don't know any of this has happened and certainly would have paid the amount had you known it was due. Alternatively, with over 20% of credit reports containing some level of inaccuracy, mistakes happen. If you’ve had collections in the past, there’s a chance they might be reporting inaccurately, even if it's been paid out. So as far as your mortgage is concerned, it really doesn’t matter if the collection is a reporting error or a valid collection that you weren’t aware of. If it’s on your credit report, it’s your responsibility to prove it’s been remediated. Most lenders will accept documentation proving the account has been paid and won’t require those changes to reflect on your credit report before proceeding with a mortgage application. So how do you know if you’ve got mistakes on your credit report? Well, you can either access your credit reports on your own or talk with an independent mortgage advisor to put together a mortgage preapproval. The preapproval process will uncover any issues holding you back. If there are any collections on your bureau, you can implement a plan to fix the problem before applying for a mortgage. Moral Collections What if you have purposefully chosen not to pay a collection, fine, bill, or debt for moral reasons? Or what if that account is sitting as an unpaid collection on your credit report because you dispute the subject matter? Here are a few examples. A disputed phone or utility bill Unpaid alimony or child support Unpaid collections for traffic tickets Unpaid collections for COVID-19 fines The truth is, lenders don’t care what the collection is for; they just want to see that you’ve dealt with it. They will be reluctant to extend new mortgage financing while you have an active collection reporting on your bureau. So if you decide to take a moral stand on not paying a collection, please know that you run the risk of having that moral decision impact your ability to secure a mortgage in the future. If you have any questions about this or anything else mortgage-related, please connect anytime! It would be a pleasure to work with you!
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