Leading alternative lenders demonstrate flexibility as clients cope with economic uncertainty
Grow your business and expand your reach by offering a solution tailored to the 55+ demographic
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Rising interest rates have had a big impact on house prices and values, as well as mortgages. How are lenders adapting?
RISING INTEREST rates meet falling house prices.
As the market cools, inflation continues to bedevil spending, the pandemic ebbs away, and demand continues for housing, it has never been a more exciting, and frenetic, time to be in the mortgage game.
What are Canada’s leading alternative lenders focusing on in this climate? CMP spoke with some of the country’s most prominent lending executives to get their view on the lay of the land at present – and what could be coming down the tracks as the space continues to develop in the future.
What has been top of mind for your company in its approach to the market this year?
Steven Lang: VWR Capital Corp’s approach to the market this year continues to be our accessibility, knowledge, data, and flexibility provided to our broker partners and, after funding, servicing borrowers in this very uncertain economy.
With inflation, changes in lending policies everywhere, real estate value fluctuations, and regulation changes, it is key to have consistent touch points with our
brokers to ensure they are providing the best advice to their clients with full transparency of the options available. Having the borrowers’ goals in mind along with the exit strategy is very important in the current environment to ensure peace of mind for all parties involved.
Grant Armstrong: Top of mind for Community Trust when we planned out 2023 was a focus on ensuring we provide great value and service for both our broker partners and their clients. This means reviewing not what it is that we do but the way in which we do it. The market continues to evolve, and with that so will we. We are very proud of the work we have done in the last few years to earn our partners’ trust, and will continue to focus on that in 2023.
Rene Quercia: Inflation continues to be a significant factor for most Canadians and can be especially difficult for older Canadians that may be on a fixed income. Unexpected expenses such as repairs to their house or renovations to accommodate a change in mobility could pose a challenge if liquid funds are not readily available. Reverse
mortgages offer a practical solution and can help Canadians 55+ get through these challenging times.
With interest rates now at much higher levels than just a few years ago and inflation making it even harder to save for a down payment on a house, young Canadians are turning to their parents for support in purchasing their first home. A reverse mortgage can help parents find the money they’d like to gift to their children to help fund the down payment.
Steven Lang: To date in 2023, we are noticing an increase in broker(s) and existing borrower(s) contacting us in regards to fees, renewal interest rates, and options for payments. At a high level, most of these items are related to cash flow concerns (now and in the future), assumptions based on headlines in the news, the unprecedented industry interest rate increase in such a short period
of time, and how that all impacts the situation. In this market, VWR Capital is committed to being in front of brokers and helping structure deals to match their clients’ expectations of being transparent and aligned on what it can provide.
Grant Armstrong: It’s no secret the economy has changed over the last 12 months, and the most interesting trend is the resilience of Canadians to adapt and manage through this change. But what is even more incredible is how ... important mortgage brokers/agents have been to providing sound … advice to their clients. Mortgage brokers/agents are absolutely a key part of any Canadian’s trusted circle of advisors, and that will continue to deepen.
The outcome of this is brokers who have worked with their clients for months, or even years, and have helped them prepare for their “next mortgage” or “next renewal.” The bond … between the borrower and their broker is at a greater level than ever before.
Rene Quercia: There is definitely continued demand for reverse mortgages and [information on] how they can fit into the financial picture of older Canadians. People are interested in knowing how they can unlock the wealth accumulated in their real estate assets without the need to sell their homes. We get many inquiries on how older Canadians can use the CHIP Reverse Mortgage to help fund major purchases or significant travel and leisure plans.
“I always try my best to put myself in the broker’s shoes, and I encourage our team to do the same”
Steven Lang, VWR
What are you encouraging mortgage brokers to focus on when it comes to your sector this year?
Steven Lang: Personally, I always try my best to put myself in the broker’s shoes, and I encourage our team to do the same. What pressure is the broker under from their clients? How many lender policy changes do they keep up with? What options are available for unique situations that may be new to them (for example, a client declined by bank for the first time, or a client not offered a renewal even though they have no missed payments)?
VWR Capital remains committed to providing full transparency, offering simple and unchanged lender fees, a flat renewal fee, and continued touch points required for brokers and borrowers based on their needs.
Grant Armstrong: Three things: Advice, Know Your Customer, and Know Your Lender. The last couple of years have been done at a very fast pace, and in some cases this need to go fast didn’t help everyone to act as efficiently as they needed to. Now we all need to focus more on efficiency, as we continue to grow and build our business.... Clients need to be given options for their own
success. Traditionally, brokers have provided what they perceived to be the best solution, but instead we should be giving them two or three considered options and allowing them to make the decision. It’s equally important to understand your client’s true financial picture: What are they trying to accomplish? How do they get paid? How do they earn their income and from where?
Rene Quercia: With the real estate market being a lot softer this year, many brokers are looking at their databases for opportunities to refinance existing customers. We’re encouraging them to also look at the
potential for reverse mortgages. Many brokers have never helped clients with a reverse mortgage, so they need to build their knowledge and confidence with how this solution can work for certain clients. They also need to rely on a trusted partner that can help them add this solution to their product suite, deliver a great experience, and be there to service customers long after the funding. HomeEquity Bank’s CHIP Reverse Mortgage is the original and still best solution in the market.
What is your overall outlook on the future of the space for the next 12 to 18 months?
Steven Lang: The next year or so will be bumpy, uncertain, and filled with opportunities. In any business, being accessible, transparent, and living up to what it is you say you are good at and known for are key. People everywhere are looking to brokers and to lenders for the best solutions possible, knowledgeable staff at all levels, and decisions that are in their best interest with full transparency in a timely manner.
Grant Armstrong: The outlook is extremely bright. The Alt space has continued to evolve over the years. We don’t look at the business as something that
changes month over month, or quarter over quarter. Instead, we look at the run rate over the last 5 to 10 years, and the Alt space has proven to be a key part of the wider mortgage landscape, and is currently even more important than ever.
Rene Quercia: With the demographic shift and less activity in the purchase and sale of real estate, we see lots of opportunities for growth over the next several years. Inflation will continue to be a factor in all our lives, and getting access to funds, whether for large purchases or projects or to supplement retirement income, will become increasingly more important.
At HomeEquity Bank we are doubling down on the broker channel and investing to expand the team across the country and continue to find ways to support and add value to these important partnerships.
Steven Lang: Private lending is a great option for many situations. It is worth noting that the longevity of a lender, the consistency of lender fee structure, and servicing should play roles in deciding what lender brokers are partnering with. There are too many examples of surprises at funding, high renewal costs, and unexpected calling of the mortgage out there in the market that requires all of these items to be key for all parties involved.
VWR Capital has been servicing the residential equity-based mortgage market for 30 years with a fee structure that remains simple and unchanged. This includes a $200 one-year closed renewal fee. We also understand that sometimes we may not be the best solution and have no issues providing the “why” to our partners so they can still maintain their own servicing standards for their clients.
“Take your time and listen to your clients; continue to be their trusted advisor”
Grant Armstrong, Community Trust
Grant Armstrong: Take your time and listen to your clients; continue to be their trusted advisor. Get to know who they are, what their business is, and what they want. When you do that, they will win, and so will you!
Rene Quercia: There are still many myths surrounding reverse mortgages, and many brokers have never considered this solution as part of their advice and product lineup. The best way to get started is to let us show you what is available, how it works, and what you can expect from us. We will guide you to help your clients every step along
the way. Most importantly, we will be there for years to come to ensure your clients are well served and you are supported in making the CHIP Reverse Mortgage part of your practice.
As we invest more into the broker network across Canada, we’d encourage you to share your feedback and tell us how we can help you add these product solutions to your business.
We work diligently to find creative solutions for your clients who don’t qualify for traditional financing.
• uDrive: No Fee or Lower Rate
• Residential 1st and 2nd mortgages
• Fully open options available
• Lending in BC, AB, and ON
• Maximum LTV of 75%
Rene Quercia, HomeEquity Bank
A CLIENT has good credit, but onerous rules mean they are still having trouble securing a mortgage.
It may be time to think beyond the bank on the corner.
“In the past, there was a perception that if you’re getting private money, it’s because you’re in desperate need or something is drastically wrong. But that’s not the case,” says Todd Poberznick, vice president national sales for CMI Canadian Mortgages Inc. “Private lenders often help people with good credit.”
Tight rules and qualifying requirements, including the mortgage stress test, mean that even low-risk borrowers are now struggling to qualify for a mortgage at all, or to get the amounts they need for the homes they want.
One very particular reality of the 2023 mortgage market is the impact of variable rate mortgages meeting rising interest rates.
Where a monthly payment may have been $1,500 a month, say, last year, “now, all of a sudden, that payment is $2,500.” With credit card and other debt to be paid down, along with regular bills, “there’s no room for that extra $1,000. The borrower can look at taking a second mortgage to tap into their equity for some cash flow relief and stay in that variable rate mortgage because it could go back down,” he says.
The evidence is more than anecdotal. One in three Canadian homebuyers are increasingly seeking out non-traditional mortgage solutions and renewing their mortgages in
the alternative lending space, according to the Canada Mortgage and Housing Corporation (CMHC).
“If you are locked into a mortgage and you’re looking at refinancing, you’re refinancing out of a lower rate into a higher rate,” explains Poberznick. “A second mortgage can be a valuable option to give you access to the funds you need today while you wait for rates to come down. When they do, you can then blend the first and the second mortgage and roll them together into one mortgage,” with a lower rate.
Private lenders like CMI are more interested in the story behind the numbers and, unlike banks, can look beyond a borrower’s debt-to-income (DTI) and other ratios to find creative financing solutions.
Going private for AAA borrowers can also mean faster approvals and funding, flexible
underwriting, custom loan terms, a willingness to finance non-traditional properties, as well as fewer documentation requirements. Also, while banks may have programs for self-employed clients, borrowers need near-perfect credit as well as a history of business tax returns that can prove income.
“Looking at bank statements or audited financial statements gives us an ability to gauge cash flow and liquidity,” he says. “We look at money in and money out – and the explanation behind those flows. We can be more flexible than other lenders who rely more on strict ratios and require specific documentation.”
Short-term funding is also available for bridge financing when there is a gap between selling an existing home and purchasing a new place.
“We title properties for up to 60 days,”
Alternative lending may be an option for borrowers with good credit as rising rates take a bite
he says. The borrower moves into their new home, and once the old place sells, “they pay us out.”
Bridge financing can also be used to help adult children with a down payment on their first home to lift them out of a tight rental market. Banks do provide shorter-term loans, but it is much harder to qualify for these and can even be at a higher rate compared to a private lender.
“We deal with everyday people that have situations that arise, like a temporary layoff or problems with their home that need to be dealt with,” he says. “We look at each one individually and do our best to find a solution to help them. We’re not governed as strictly as the banks. We can allow for flexibility and customize terms to the borrower’s situation, and that’s a real difference-maker.”
The relationship between borrower and lender is important, but so too is the relationship that CMI has with brokers.
“Every deal is different,” he says. “What we do best is partner with brokers exclusively across Canada and help them put customized deals together for their borrowers. We pride ourselves on that collaborative approach.”
Higher interest rates have cooled the market, creating challenges for many on the mortgage front. New construction was seen as a lucrative investment by many –but some realtors are reporting serious concern from some homebuyers who purchased pre-construction homes at the peak of the real estate boom. A group of Ontario homebuyers reported that, due to elevated borrowing costs and lower home
values, they no longer qualify for the mortgages they need for pre-construction homes that they purchased at the start of 2022.
Some of those that still qualify are being offered a much lower mortgage amount, and, with the significant climb in mortgage rates since contracts were inked, monthly payments are potentially unaffordable.
“We’ve obviously dealt with a bit of a downturn in the marketplace,” says Poberznick. “Values have dropped, so, if you bought a property a year ago, or eight months ago, and you have a contract
shortfall necessarily. But if the buyer has put down a big deposit, they don’t want to lose it, and they’re going to go ahead with the deal. That’s where we will step in and offer some help to close the financing gap.” This gets the client into the property and ensures they do not lose their deposit.
Another option is using equity from another property the client may own and “taking the security of both properties. We would register against both properties and provide a mortgage based on that combined equity position.”
purchase price at a million dollars, that’s the amount you need to close at, even if the market value has fallen. The challenge is that financing is going to be tied to the lower market value at completion time. You’re going to have to make up the difference to close on the purchase contract. It’s a very frustrating and difficult situation for homebuyers in this position.”
For those of you who “don’t have enough financing in place, it doesn’t mean we are going to step in and cover the full
CMI Canadian Mortgages Inc. (CMI) is a private mortgage lender working exclusively through the mortgage broker channel. With roots as a mortgage brokerage, CMI takes a common-sense approach to partnering with brokers to serve a diverse range of borrowers, ensuring accessible solutions available to all. Widely recognized as a tech-forward industry leader, CMI is one of Canada’s largest private lenders, with over $1.8 billion in mortgage fundings since inception, and the Mortgage Awards of Excellence 2022 Private Lender of the Year.
While the limbo song may ask, “How low can you go?” with mortgages, the question may be, “How short can you go?”
“The majority of borrowers will go into a one-year term,” compared to a two-year, he says. “When rates were lower, people tended to lock in at lower rates for longer terms.”
“No matter the term, we look for an exit strategy when we structure the deal. We look to understand why the borrower needs the funds and for how long, and we help build a plan to move them back to a traditional lender at a lower rate at the end of that term.”
CMI prioritizes a collaborative relationship with brokers to structure the optimal deal. Even before you submit a deal with them, you can reach out for advice, discuss scenarios and get help with structuring a deal.
Visit canadianlending.ca, or pick up the phone to discuss your borrower’s unique situation today.
“What we do best is partner with brokers exclusively across Canada and help them put customized deals together for their borrowers. We pride ourselves on that collaborative approach” Todd Poberznick, CMI Canadian Mortgages Inc.
Lending markets: Southern Ontario
Niche/focus: Residential and commercial first mortgages within the GTHA, SWO, and Niagara regions
Products: First mortgages for residential end users and investors, commercial investors and owner-occupied borrowers, borrowers looking to use existing equity in other owned properties for blanket mortgages purposes
Customer type: A-, B-, or C-level credit. Salaried, self-employed, investors with portfolios and available equity
Income sources: Salaried, self-employed, income from existing investment properties
Property types: Single-family residential, multi-family residential, mixed use, industrial
Purpose: Purchase, refinance, ETO, bridge loans
Maximum LTV: 65%
Minimum Beacon: 550
Terms: 12 months closed is standard (open to longer/shorter and can be flexible on structure)
Rates: 10–12% (typical)
Maximum amortization: Interest-only is standard; principal and interest is possible and deal-specific
Fees: 2–3% (typical)
Minimum loan amount: $250,000
Maximum loan amount: $5 million
Special features: We work with a lot of investors and offer blanket-mortgage solutions for multiple properties and portfolios. We can be flexible on deal structure while providing reliable and approachable customer service to everyone that we work with. Able to fund within three to five business days if warranted
Lending markets: Ontario, British Columbia, and Alberta
Niche/focus: Alt-A lending
Products: Conventional mortgages, non-conforming mortgages, second mortgages, investment properties, business for self (BFS), home equity line of credit (HELOC)
Customer type: Clients with all income types accepted, including traditional and non-traditional income sources. Salary, commissioned, BFS, and various
others. Clients with bruised or limited credit, including those with previous bankruptcies, collections, and judgments
Income sources: Self-employed, salaried, child tax credit/UCB, foster care, maternity/paternity income, seasonal employment, alimony/child support, pension, contract, rental, tip, disability, investment, commission- based
Property types: Single-family homes, row houses and townhouses, condo/strata, well and septic, multi-unit homes
Purpose: Financing available to purchase or refinance a principal, secondary, or investment property
Maximum LTV: 80%
Minimum Beacon: 500 FICO score
Terms: One, two, three, and five years
Rate type: Fixed
Maximum amortization: 35 years
Fees: 1%. No-lender-fee mortgages also available
Minimum loan amount: $100,000
Maximum loan amount: No listed maximum mortgage amount
thecmigroup.ca
888-465-8584
Lending markets: Ontario, Quebec, British Columbia, Alberta, Manitoba, and Atlantic Canada
Niche/focus: Customized private mortgage financing delivered exclusively through the mortgage broker channel. Offering flexible, innovative solutions tailored to your clients’ needs. First and second mortgages up to 80% LTV with
competitive rates. Known for ethical lending practices and exceptionally fast service
Products: First and second mortgages, short-term and bridge loans, equity mortgages, bundle mortgages, and renovation financing
Customer types: A-, B-, and C-level credit.
Income sources: All income types considered: salary, commission,
business for self, freelance, and retired
Property types: One- to four-unit owner-occupied rentals, condos, and cottages. No restrictions on location. Remote and rural properties considered on a case-by-case basis
Purposes: Financing available for purchases, business working capital, debt consolidation, bridge loans, investment purposes, tax or mortgage arrears, pandemic relief, home renovations, and more
Maximum LTV: Up to 80% on first and second mortgages in major urban and suburban markets; 75% or less in smaller towns or rural locations. Blanket mortgages are considered on a case-by-case basis
Minimum Beacon: None
Terms: 3, 6, 9, and 12 months. Custom terms are available
Rate type: Fixed
Maximum amortization: Up to 40 years or interest only
Fees: 2–3.5% on first mortgages, 3–6% on second mortgages. Fees are dependent on location, income, credit, and security
Minimum loan amount: $50,000 on first mortgages, $25,000 on second mortgages
Maximum loan amount: Up to $1.5 million in urban markets
Special features: No hidden application fees, early repayment penalties of no more than three months, open mortgages and custom term lengths available; CHIP/reverse mortgages, second mortgages, second behind collateral-charge mortgages, high-ratio mortgage bundles, short-term/bridge loans available
firstsourcemortgage.ca
416-221-2238
Lending market: Southern Ontario
Niche/focus: Commercial bridge lending, industrial, land, income-producing, etc.
Products: First mortgages – bridge loans
Customer type: Builders and developers, private investors, etc.
Property type: Commercial and residential first mortgages
graysbrookcapital.ca
506-380-4950 (Atlantic) 647-343-2670 (Ontario)
Lending markets: Atlantic Canada (Nova Scotia, New Brunswick, Newfoundland, Prince Edward Island) and Ontario
Niche/focus: Graysbrook Capital specializes in providing short-term financing solutions to its clients. As equity lenders, we provide quick funds for clients requiring bridge financing, consolidating debts, building a new home or renovating a home, or just simply needing cash flow
Products: First and second mortgages, bridge financing, ETO, construction loans, commercial loans
Purpose: First Source is a boutique private, commercial, bridge lender offering flexible lending options with a committed, hands-on approach. We are an asset-based lender evaluating the strength of a loan based on the value of the real estate
Maximum LTV: 80%
Minimum Beacon: None
Term: One to two years
Rate type: Interest only
Maximum amortization: Not applicable
Fee: 2%
Preferred loan amount: $3 million to $9 million
Customer type: All income considered including salary, commission, BFS, stated income; retired
Property types: Residential, multi-unit, townhouses/semis/condos, cottages, rural case by case
Purpose: Purchase, refinance, consolidation, renovations, cash flow
Maximum LTV: 75% urban
Minimum Beacon: None
Terms: 6 to 24 months (typically 12 or less)
Rate type: Fixed
Maximum amortization: Interest only
Fees: 2–4% on first, 2–6% on second, depending on credit, location, security
Minimum loan amount: $25,000
Maximum loan amount: $3 million
Special features: Prepayment holdback, blanket mortgages, multi-unit construction
chipadvisor.ca
866-522-2447
Lending markets: Canada
Niche/focus: Reverse mortgages
Products: CHIP Reverse Mortgage, Income Advantage, CHIP Max, CHIP Open
Customer type: Canadian homeowners aged 55+
Income sources: Borrower must provide valid and adequate home insurance and property tax statement (current year or deferred property tax statement)
Property types: Single-family dwelling, detached duplex, triplex, quadruplex, link home, semi-detached, townhouse/ row house, condo – townhouse/stacked townhouse, condo – apartment style
Purpose: Canadians 55+ can access up to 55% of the value of their home in tax-free cash to retire in the homes they love
Maximum LTV: 55%
Minimum Beacon: No minimum
Terms: Six months, one/three/five years
Rate type: Fixed and variable
romspen.com
800-494-0389
Lending markets: Canada and the US
Niche/focus: Urban centres (non-urban centres on a case-by-case basis)
Products: Term, bridge, construction, predevelopment and portfolio, and revolving credit facilities
Customer type: Commercial borrowers, developers
Property type: Industrial, commercial, multi-family, condo, entitled land, retirement, mixed use, hotels,
development projects, construction facilities
Purpose: Purchase, refinance, development, construction
Maximum LTV: Typically up to 65% LTV for land loans, 65% LTV / 75% LTC for construction loans, up to 75% LTV on income-producing properties
Terms: Two months to three years
Rates: From 9.5%
Maximum amortization: Interest only: flexible amortization
Fees: From 2% of loan amount plus
Maximum amortization: Not applicable
Fees: Closing fee
Minimum loan amount: $20,000
Maximum loan amount: Not applicable
Special features: No monthly mortgage payments required
lender’s legal fees, disbursements, and applicable taxes
Preferred loan amount: $10 million to $100 million
roigroup.ca
519-755-6252
Lending markets: Ontario
Niche/focus: Direct lender providing mortgage financing for commercialbased activities for developers, builders, business owners, and real estate investors
Products: First and second mortgages
Property types: Development land, construction projects, industrial, commercial, rental properties, special purpose properties
Purpose: Equity-based lending
Maximum LTV: 70% LTV; all deals are evaluated on a case-by-case basis
Minimum Beacon: Not required
Terms: One to three years
Rate types: Fixed and floating
Maximum amortization: Interest only
Fees: 2%
Minimum loan amount: $500,000
Maximum loan amount: $20 million
Special features: Crosscollateralization, interest reserves, revolving construction facilities
threepointcapital.ca
800-979-2911
Lending markets: British Columbia, Alberta, and Ontario
Niche/focus: Creative solutions-based flexible lending on marketable residential properties in urban locations for those who do not qualify for traditional lending. Tell us your client’s story and we’ll do our best to help
Products: First and second mortgages
Customer type: Private individuals, non-residents (refinances only), and new to Canada, as well as holding and operating companies (with personal guarantees of all directors)
Income sources: Hourly and salaried
vwrcapital.com
866-907-5407
Lending markets: British Columbia, Alberta, Saskatchewan, Manitoba, and Ontario
Niche/focus: Residential private mortgages
Products: First, second, and third mortgages
Customer types: Individuals, holding companies, operating companies, non-residents, and more
employees, self-employed, stated income, and retirement income are accepted, subject to overall comfort on ability to pay
Property types: Residential owneroccupied or rental, single-family detached, townhouses, duplexes, fourplexes, and condominiums
Purpose: Purchases, refinances, equity take-out, debt consolidations, and renovation projects
Maximum LTV: Up to 75% LTV
Minimum Beacon: 600
Terms: One year. Renewals offered to borrowers in good standing with a fully transparent renewal process that provides peace of mind
Rate type: Fixed rate with options for an open term
Maximum amortization: Up to 35-year amortization on first mortgages, up to 30 years on second mortgages, and interest only considered on first mortgages up to 70%
Fees: Our uDrive lending program allows you and your client to choose between no lender fee and a higher rate, or a lower rate and a 1% or 2% fee, depending on what best suits the client’s individual needs
Minimum loan amount: $50,000
Maximum loan amount: $1.25 million on a single property and $2.25 million inter alia
Special features: First mortgage construction financing in BC
Property types: Single-family, townhouses, condos, row homes, serviced land, raw land, multi-family
Purposes: Purchase or refinance, equity take-out, debt consolidation, foreclosure rescue, and more
Maximum LTV: 75%
Minimum Beacon: None
Terms: One year, open or closed
Rate type: Fixed
Maximum amortization: Up to 35 years; interest-only mortgages available
Fees: Starting at $750 for first mortgages; $500 for second or third mortgages
Minimum loan amount: $50,000
Maximum loan amount: $2.5 million
Special features: Basic and low fee structure with one-year closed renewals at only $200. Whether it’s an open or closed one-year term, the rate is the same! Owner-occupied or rentals considered with same criteria
