Alternative financing: Bundle with private funding

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Attaining alternative financing in smaller housing markets can be difficult, according to one leading player in the space, but there are workarounds that can be done to ensure your client gets the financing he needs.

“Some lenders suggest topping up (the mortgage) with private funds,” Adam Hale of The Mortgage Centre said. “Some of these lenders have brought back bundled products where they do a first and second mortgage for you and it’s a way to get clients to 80 per cent loan-to-value.”

Speaking to CMP Magazine for its upcoming Alternative Lending Guide, Hale revealed some tricks of the trade for funding difficult deals in difficult markets. The Hamilton-based broker has faced issues with lenders who refuse to lend to the maximum loan-to-value thresholds.

“This is where you get hit even harder: When you look for a property just outside city limits, that’s really where you differentiate yourself as a broker,” Hale said. “With these deals, you’ll be offered 65-70 per cent loan to value, which can be difficult. You either have to shore it up with a private second mortgage or you hope they can squeeze into that grey area that local credit unions will lend on.”

Alternative lending has become increasingly popular among brokers, with a recent MortgageBrokerNews.ca poll revealing that 44 per cent of brokers saying alternative deals to make up at least 40 per cent of their business.

It’s a number that is growing year-over-year: This year’s Brokers on Lenders survey revealed that, on average, 20.5 per cent of deals are non-prime – compared to 18.6 per cent a year prior.

Watch out for CMP’s December issue, which will feature an in-depth guide to alternative lending, as well as the annual Broker Lifestyle survey. 

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