Getting a mortgage from a traditional bank isn’t always easy. Lenders impose strict criteria, excellent credit scores, low debt ratios, and proof of stable income, that many borrowers simply can’t meet. This includes self-employed individuals, those who have declared bankruptcy, or anyone with non-traditional income sources.
Alternative mortgage lending has become an increasingly tangible option: according to CMHC, its market share among newly issued mortgages reached 19.5% in the first quarter of 2023, up from 14.9% in 2021. More flexible than traditional lending, it offers solutions adapted to the realities of Quebec’s housing market. In this article, we explain what this type of financing entails, who can benefit from it, and why it represents a relevant option, especially with the expertise of Lauréat Finance.
How does an alternative mortgage differ from a conventional loan?
Conventional mortgages, offered by major banks, rely on a strict analysis of credit scores, income, and debt capacity. Unfortunately, this model excludes many borrowers… even those with strong but non-traditional income sources.
Alternative real estate financing takes a more flexible approach. B lenders (non-traditional financial institutions) ease some of the standard criteria, while private mortgage lenders focus primarily on the property’s value and the size of the down payment. Instead of focusing solely on credit scores, these lenders assess the overall financial picture, making financing more accessible to a wider range of borrowers.
Why choose an alternative lender?
Turning to an alternative lender offers several advantages:
- Accessibility: Open to borrowers who may be rejected by traditional banks
- Flexibility: Evaluation criteria adapted to modern financial realities
- Speed: Faster approval processes
Who is eligible for alternative real estate financing?
Alternative financing is designed for borrowers who don’t meet traditional bank requirements, such as:
- Self-employed individuals with variable or hard-to-verify income
- People with poor credit who struggle to get approved
- Homeowners in financial difficulty, facing a 60-day notice or a legal hypothec
- Borrowers needing quick refinancing to consolidate debt
These situations show that a bank refusal is not a dead end: alternative financing can be tailored to each individual borrower’s circumstances.
Types of products offered in alternative mortgages
Alternative lenders offer a variety of options depending on the requirements of the borrower:
- Second mortgage
- Debt consolidation loan
- Bridge loan to finance a new property before the sale of the old one
- Private residential mortgages ranging from $10,000 to $1,000,000.
These solutions enable you to quickly obtain liquidity and restructure your finances. They are suitable for urgent situations as well as medium-term projects, offering a level of flexibility that traditional banks do not provide.
The approval process with an alternative lender
Unlike banks, which require multiple verifications and a lengthy analysis process, alternative lenders stand out due to their fast turnaround times. Steps include:
- Summary assessment of the application and property value.
- Submission of essential documents (proof of income, property information).
- Approval and payment much faster than with a traditional bank.
Interest rates and terms: what to expect?
Alternative lenders take on more risk, and therefore charge higher interest rates than traditional banks. In return, quick access to financing can help borrowers avoid foreclosure, refinance debt, or move forward with a project, even with a less-than-perfect financial profile.
Is this a long-term or temporary solution?
An alternative mortgage is often a short-term solution. It helps borrowers stabilize their financial situation, improve their credit profile, or resolve urgent debt. The medium-term goal is usually to transition back to a conventional mortgage with better terms.
Examples of situations where an alternative mortgage can provide assistance
A startup entrepreneur may have promising income, but often too irregular to meet the strict criteria of traditional banks. Similarly, a self-employed worker with legitimate income that’s hard to document for tax purposes may be denied a conventional mortgage, despite having the means to repay.
In some other cases, alternative mortgages become a lifeline: a homeowner under pressure after a 60-day notice can quickly refinance to avoid losing their home, while a heavily indebted family can consolidate payments and regain financial stability. In each of these scenarios, alternative financing enables fast action to protect one’s assets.
Conclusion: A flexible solution tailored to your reality
Alternative mortgage financing stands out as a practical response to the overly strict criteria of traditional banks. By offering flexibility, speed, and accessibility, it enables non-traditional borrowers to achieve their real estate goals.
At Lauréat Finance, we put our expertise to work for homeowners and borrowers to offer them financing solutions ranging from $10,000 to $1,000,000.
About the author
Co-President
Formerly a mortgage broker, Mr. McKinnon has been active in the mortgage lending industry for over 15 years. His strength lies in his ability to thoroughly assess client needs and provide tailored advice that delivers the most advantageous solution—short, medium, and long term. With extensive experience in private lending and over $500 million in notarized residential private mortgages, he stands out as Co-President of Lauréat Finance. His priority: delivering the best possible solutions efficiently and without delay.
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