A love letter to private and alternative lending
Private and alternative lenders have been saddled with a bad rap for a long time. But today, this lending space is not only trustworthy, but can be a powerful short term asset in helping Canadians gain maximum long term growth.
Since the start of the pandemic there has been an almost 40% increase to the number of originations in the private and alternative spaces - and with good reason. Not only do these spaces allow for more flexibility when borrowers bring diverse income and credit histories to the table, but the growing sector offers competitive rate and fee structures that make them an amazing short term solution for long term financial gain. In situations where income or credit make securing a mainline mortgage difficult, these loans can be the perfect tool for buying time and building momentum to enter back into the A-lending space.
There are a few major misconceptions about this space that was once considered fringe on its best day and predatory on its worst that I think need to be debunked once and for all:
Private and alternative lenders are not predatory
Once upon a time, a few bad apples made a bad name for private and alternative lending. The truth, however, is that with increased regulations and stiffening competition there is absolutely no space in this sector for unsavoury lending practices.
Private and alternative lenders do not always cost a fortune in rate and fees
The belief that this sector only lends at rates of 15% and above, and slaps the borrower with tens of thousands dollars in fees is simply untrue. Sure, rates can be a bit higher, but the flexibility of these lenders means that they are able to price to risk; in other words - private and alternative lenders are able to weigh the credit risk of each client and property on an individual basis. This means that, depending on your situation, taking this route may actually save you money in the long run.
Private and alternative lenders do not have the client’s best interests in mind.
Again - this is flat out false. Our team has strong relationships with a large and diverse group of private and alternative lenders and I can tell you, without question, that most lenders in this space probably actually care more about your best interests than their institutional counterparts. These types of loans are meant to be short term solutions to complex financial situations - their entire purpose is to help homeowners create the strongest financial foundation for themselves possible with the least amount of friction. They are also typically much smaller businesses who will get to know the faces and names of all of their borrowers - which you won’t see at the big banks.
Suffice it to say that our team has a strong love for this once-maligned lending space. At the end of the day, our role as independent mortgage brokers is to help you find the financing solution that is not only the most cost effective, but also offers the best long term outcomes for you and your family. If you have questions about how private and alternative lending could best serve you, give our team a call today!
