Expert & Unbiased Advice | Access to 100+ Lenders| Pre-approval in 48 Hrs | Lowest Mortgage Rates

How Alternative Financing Can Help When Rates are High (Part 2)

Author: Cody Rowe - Mortgage Broker |

 Blog by Cody Rowe - Mortgage Broker

Here is part 2 of our series on how alternative lending can be useful during times of high interest rates. Before you dive into the second part of our series, if you have not yet read part 1 click here to start from the beginning.

Quick and Easy Approvals

If you are competing on a property, your realtor may suggest putting in a quick possession date so the sellers can receive their sale proceeds in a matter of weeks, instead of the typical 1 – 4 months.

In situations where you need to move quickly but your bank is slow, alternative financing can be a useful solution to ensure your mortgage completes on time. Alternative financing guidelines are much more relaxed when it comes to the document’s they require to complete your mortgage approval, and therefore can get you to the finish line in a matter of days instead of weeks or months!

Business Owners Can Reduce Personal Taxes Without Reducing Their Mortgage Approval

When rates rise as much as they have over the last 12 months, this also raises the stress test therefore reducing how much of a mortgage you can qualify for. For the incorporated business owner, this can often cause the self-employed to think they need to claim higher personal incomes from their business instead of leaving it in the tax-preferred corporate retained earnings account.

This leads to paying significantly higher personal taxes just so you can qualify for the mortgage you need to buy the home you want. Alternative lending solutions can provide a very effective solution that allows the corporate business owners to benefit by both reducing their taxes and qualifying for the mortgage they need.

They accomplish this by using alternative documentation to verify the viability of your business income.

For example, instead of relying on your tax information such as your business’ corporate T2’s or financial statements, they will base the mortgage application off of the last 6 months of business bank statements and after deducting regular expenses, will use the corporate gross income.

This can help you avoid having to claim the income personally, saving you potentially tens of thousands of dollars in personal taxes!

Can Work as a ‘Gap-Filler’ Mortgage

When rates are high like they are, this has an effect of raising the stress test. If you’re not aware, the stress test is used to determine the size of your mortgage approval.

Because the traditional banks are also limited to traditional financing guidelines, this combination of a rising stress test and conservative lending policies will drastically reduce the size of the mortgage you are approved for.

Alternative lenders have the ability to remove the stress test but also apply unique features like a 35-year amortization, increased debt servicing guidelines or extra reliance on rental income these banks often work as gap-fillers to qualify you for the money you need while we wait for the stress test to reduce.

In today’s market, this extra mortgage money could be the difference between getting a condo with an extra bedroom to rent or upgrading into a detached home that includes a basement suite that you can rent as a mortgage helper!

When working with an alternative lender, they know they’re not the final destination, so they will offer either a 1, 2 or 3-year term while we wait for interest rates and therefore the stress test, to go down. When they do go down, we switch over to your preferred lender of choice!

Do any of these examples relate to your situation? Have questions on whether alternative financing could help you? Click here to schedule a free discovery call today 

Mortgage Calculator