Your Financial Options

Not too many people know that there are different options to finance your property.

Generally lenders categorized by “A”, “B” and private money categories. They are different in terms of: the geographical focus, the property types, the number of rental properties one can own, some lenders have good products for self-employed individuals or clients with challenged credit. They also differ in terms of supporting of documentation required from the client to close the deal.

“A” lender include banks and bank-like lenders. These are lenders with the most strict mortgage qualification criteria to clients.  Usually to qualify you need to have income and good credit history. These financial institutions require full documentation. Most of the time it is owner occupied property in locations with strong economic fundamentals. On the other hand, they offer the lowest rates to client and possibility of a small down payment.

“B” lenders deal with lending situations that A lenders typically wouldn't accept. For example, people with bad credit history: bankruptcy, consumer proposal, or low credit score most likely will be accepted. They maybe clients who are self employed and do not show the income to qualify with A lenders. People who invest in real estate find this lending very useful because B lenders are more flexible with locations and number of rental properties. In many cases, it is a short-term solution until the client either gets their credit back in line or has the income to qualify through A lender. 1 to 3 year fixed terms are common with this type of lending.   

Often the last resort for those who cannot receive mortgages from other sources is private money lend on equity in the property. The lender is not concerned with credit or income but will review it to get an overall feel for the applicant. Also larger down payment is required. 

Construction financing for small and large projects is popular in private lending because the lenders do not impose the stringent guidelines that A lenders do on the client. The terms are usually short and do not exceed 1 year period. Interest rates and fees are higher than B lending.