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Non-bank mortgage lenders in Canada

Many young Canadians dream of purchasing a home, but they rely on getting a mortgage as it involves a substantial monetary commitment. Borrowing money from a lender may sound like a straightforward process, but sometimes it’s not. Finding a lender can be stressful and confusing because of their varied individual requirements. If you are a first-time homebuyer looking for a mortgage:

  1. You can directly work with a bank.
  2. You can work with a non-bank mortgage lender.
  3. You can hire a mortgage broker to present you with multiple options.

While working with a bank might seem like a straightforward option, several factors make them a poor choice for many Canadians. We have compiled a comprehensive guide about non-bank mortgage lenders in Canada, why they can be a good choice, and how they differ from other lenders.

Non-Bank Mortgage Lenders in Canada

How are non-bank mortgage lenders different from banks?

Non-bank lenders often specialize in particular categories such as mortgage loans. Since they only offer loans for specific purposes, they are considered direct lenders, just like banks. However, they differ from banks for the following reasons:

Product options: While banks offer a variety of products like credit cards and saving accounts, non-bank lenders may specialize in a specific loan category like home equity mortgages. Non-bank lenders do not offer deposit services, such as checking, savings, or registered savings accounts.

Rules & regulations: Banks have specific criteria that customers have to fulfill to get approved, and they are very stringent about them. In comparison, mortgage lenders are willing to think outside the box.

Interest rates: The interest rates offered by banks are connected to your credit and income history, which means individuals with lower credit scores and earnings find it difficult to get competitive rates from banks. Non-bank lenders may approve your application even if you have a low credit score.

What are the types of mortgage lenders in Canada?

Because there are so many options to choose from, you should not settle for the first mortgage lender you come across. Instead, it’s better to explore the market and look for the most optimal lender that meets your needs. There are two distinct categories of non-bank mortgage lenders:

Private lenders

Private lenders offer loans to individuals or businesses but are not tied to any bank or credit union. Private lenders base their rates on your current home equity. All private lenders have varying terms & conditions, which could sometimes include hidden fees and penalty terms. You are more likely to get a fair deal if you have an experienced mortgage broker helping you. Private lenders are fast becoming the first choice of a growing number of Canadians.

Regulated lenders

Regulated lenders are government-regulated institutions that offer loans to clients with a good credit history and steady income. With the number of non-bank lenders on the rise, regulated lenders also offer very competitive interest rates. Most regulated lenders work with mortgage brokers, so if you want to take advantage of their benefits, you’ll want to work with a mortgage broker.

What are mortgage brokers?

Mortgage brokers act as mediators between borrowers and lenders. Mortgage brokers work to find you the best mortgage options that meet your requirements. A good broker would know which lenders are the most flexible and likely to approve your application. Mortgage brokers operate in a very competitive market and work hard to present you with the best product options. This plays out in your favor as you have more choices, as well as expert advice.

How do mortgage brokers work?

Mortgage brokers have access to different lenders and their rates, allowing you to compare multiple options at once. They will find you the most suitable mortgage options and give you the necessary details to make an informed decision. Brokers work for customers and have their best interests at heart. Brokerages are smaller than banks, and in most places, you will get a mortgage advisor who will work with you and answer all of your questions. You do not necessarily have to use a mortgage broker to get good interest rates. You can always search for them yourself. However, if you want a loan from direct lenders, such as banks, you have to apply individually to obtain the rates, which can quickly become a lengthy and challenging process. Working with multiple lenders also impacts your credit score negatively as they each conduct history checks. Moreover, mortgage brokers have better connections and can even help you secure a specialized offer.

Getting a mortgage requires much research, especially for Canadians who can’t rely on banks to provide them with good options. There are several mortgage lenders apart from banks, and learning more about them will help you get the best possible offer.

Your mortgage may be one of the most significant investments you will make in your lifetime, so finding one that is a good fit is essential. Make sure to get the help of a mortgage broker to ensure that you make the right choice!

Mortgage Maestro can help you find custom mortgage solutions.