In the lending world, Alternative or “B” lending is often viewed as a four-letter word, borrowers
feel it’s a stain that means that they aren’t good enough for the traditional “A” side. While Alt
lending does exist for borrowers with past credit issues many others use it to improve their
overall wealth. This can work for borrowers with easily proved income as well as those who are
self-employed with a lot of write-offs come tax time.
The realities of the current interest rate environment mean many borrowers with solid income
still can’t qualify for the same purchase price they did a couple years ago. This can leave
buyers just short of the home they really want when looking to the A lenders but since
alternative lenders can use higher qualifying ratios and potentially a 35 yr amortization we can
usually stretch someone’s buying power a significant amount using an Alternative lender. In
addition, the alternative lending world has revenue-based options for those who are self-
employed allowing for a higher qualifying purchase price while maintaining the tax efficiency of
your income.
Both of these scenarios mean that there’s a better chance of finding the home you really want
at today’s prices before the market starts to heat back up as rates decline and for many, we can
look to move your mortgage back to the A side in a year or two once rates ideally get back into
“normal” territory again.
When comparing 1 yr fixed rates, they aren’t much higher on the alt side than the A side. The
Alt side does require a minimum 20% down payment and a 1-1.5% fee would apply but when
comparing that fee to potentially paying a much higher price on the same house in 1-2 years
time there’s usually a significant savings when using the alternative route.
Courtesy of James Leitch
Mortgage Agent – Level 2
Mortgage Brokers Ottawa Licence #11759
613-266-9106