Whether you want to buy a new home or real estate investment property, getting a mortgage is the first thing. It takes the burden of the purchase off your shoulders by financing the bigger part of the investment, and then you can repay the loan in installments.
It is even possible to secure 80% of the home value in a mortgage. The home serves as collateral on the money the bank or lender gives you to purchase it. But to access a mortgage from an A lender, you must have a good credit history and a regular source of income. So what do you do when you don’t have such credentials? Consider a B lender Toronto. Learn more about blender mortgages and how they work.
What is the difference between A lenders and Blenders?
A lenders refer to the chartered banks that usually lend mortgages to prime borrowers. Prime borrowers have a stable source of income, good credit score, and history. These banks are federally regulated, and it also encompasses credit unions which are provincially regulated.
In contrast, B lenders are not federally regulated but quasi-regulated, although they indirectly follow the rules of federal regulations due to the nature of their business. They include mortgage finance companies accounting for about 20% of all Canada’s insured mortgages.
So when A lenders reject your mortgage application, you can turn to Blenders who provide alternatives to big banks and even save you more money in the long run. Most people access mortgages through major banks in Canada, including RBC, the national bank, BMO, TD, Scotiabank, and CIBC. The royal bank of Canada is the central money lender in the country, making for 27% of Canada’s mortgage market.
Reasons to consider a B lender.
Some people never qualify for mortgages with A lenders who have strict criteria for assessing applicants, including a stable income and good credit score. Reasons to consider a B lender include:
A low credit score
A credit score measures how well or poorly you manage your credit. It considers your credit history, including how long you have had credit, balance missed payments, defaulted payments, or whether, at some point, a debtor has referred you to a collection agency. Bank and other financial institutions use your credit history to determine if they are safe to lend you money.
A low credit score can reduce your eligibility for a mortgage and even the interest rate you qualify for. If you don’t meet the set minimum credit score for A lenders, you can always turn to Blenders.
Unstable income source
If you are self-employed or earn a commission basis, you might find it hard to access A lender mortgages because they require you to show at least two years of financial statements and tax returns to prove your income. In that case, you may have to opt for a B lender.
The bottom line
B lenders are ideal for applicants denied A lender mortgages due to a low credit score or unstable income. They are also a perfect option for prime borrowers who want more flexibilityas they are more accommodating to an individual’s needs.