Alternative Lenders: Mortgage Solutions for Atypical Profiles in Quebec

Alternative Financing Options: A Tailored Solution for Non-Conventional Borrowers

In the Montreal mortgage landscape, many borrowers face challenges when trying to obtain a loan from traditional banking institutions. Whether due to a particular professional status, complex credit history, or atypical financial situation, some clients are denied access to standard mortgage products. It’s in this context that alternative lenders, also known as B lenders, play a crucial role in offering adapted financing solutions.

Who are the borrowers concerned?

Several categories of borrowers can benefit from the services of alternative lenders:

A Financing Option for Recent Self-Employed Workers

Self-employed workers who have started their activity less than two years ago and who do not yet have the necessary tax declarations to meet the requirements of traditional banks.

1. Individuals with Insufficient Declared Income

   Despite stable professional activity, some entrepreneurs or independent workers may have declared income that does not reflect their actual repayment capacity.
    

2. Mortgage After Bankruptcy or Consumer Proposal

   It is possible to obtain a mortgage even if you have experienced difficulties and made a consumer proposal or declared bankruptcy in the past.
    

3. Borrowers with Imperfect Credit History:

   Individuals who have had late payments or a low credit score that does not meet the criteria of conventional lenders.
    

How do alternative lenders work?
 

Alternative lenders, such as Equitable Bank, Home Trust, B2B Bank and Haventree Bank, offer more flexible financing solutions than traditional banks.

Their approach is characterized by a more comprehensive evaluation of the borrower’s situation, beyond simple standardized criteria.

Main Conditions of Alternative Loans:
 

1. Property Condition: The financed property must be in good general condition. Alternative lenders place particular importance on the quality of the real estate, which represents the main guarantee of the loan.
    
2. Location and Financing: Geographical and Real Estate Criteria
   
   Alternative lenders generally consider properties located in urban or semi-urban areas with more than 3,000 inhabitants. Financing in rural areas is rarely possible.
    
   This restriction is explained by two key factors:
    
   
   1. Property Value: Properties in more populated areas tend to maintain or increase their value.
       
   2. Market Liquidity: The ability to quickly resell the property if needed is crucial.
      
      It’s important to understand that the property itself constitutes the main guarantee of the loan. Thus, its location and resale potential are determining factors in the lender’s risk assessment.
      
      This approach allows alternative lenders to minimize their risks while offering financing solutions to borrowers who do not meet the criteria of traditional banks.
       
3. Down Payment: It generally varies between 20% and 35% of the property value. The exact percentage depends on several factors, including the borrower’s income and credit history. This higher down payment compared to the traditional sector helps reduce the risk for the lender.
    
4. Amortization: Alternative lenders offer amortization periods of up to 30 or even 35 years, which helps reduce monthly payments and improve loan accessibility for borrowers.
   
   
5. Term Length: The proposed terms generally vary from 1 to 5 years, thus offering some flexibility to borrowers based on their situation and medium-term projects.
   
   
6. Interest Rate: The rates charged by alternative lenders are generally 1.50% to 2.50% higher than those of standard banks.
   
   This increase reflects the higher risk assumed by these lenders in accepting more complex files.
   
   
7. Fees: Fees between 1% and 2% of the loan amount are usually applied. In some cases, these fees can be integrated into the financing amount, which can be advantageous for borrowers with limited liquidity.

Advantages of Alternative Mortgage Solutions
 

Despite conditions that may seem less advantageous at first glance, alternative loans offer many benefits:

1. Accessibility: They allow borrowers excluded from the traditional banking system to access property ownership or refinance their real estate.
    
2. Flexibility: Case-by-case evaluation allows for consideration of particular situations that the rigid criteria of traditional banks cannot accommodate.
    
3. Financial Rehabilitation Opportunity: For borrowers who have experienced difficulties, it’s a chance to rebuild their credit and improve their financial situation.
    
4. Temporary Solution: These loans can serve as a stepping stone to more traditional banking products once the borrower’s situation has improved.
    
5. Quick Processing: Alternative lenders are often able to process files faster than large banking institutions.

In conclusion, alternative lenders play an essential role in the real estate financing ecosystem in Quebec.

They offer tailored solutions for borrowers who, despite an atypical profile, present real potential and proven repayment capacity. These financing options, although slightly more expensive, often represent the best, if not the only alternative for many clients.

It’s important to emphasize that using an experienced mortgage broker is particularly beneficial in this context. Brokers can effectively guide clients through the various available options, negotiate the best possible conditions, and ensure that the chosen solution is truly adapted to each borrower’s unique situation.

Thus, alternative lenders, in collaboration with mortgage brokers, contribute to democratizing access to property ownership and offer a second chance to those seeking to improve their financial situation, making these solutions an indispensable component of the mortgage market in Quebec.