Today I want to share a guest blog post by my friend Ron Alphonso of the Ron is leading a team of experts here in Toronto who specializes in complex mortgage solutions such as alternative lending. Ron was kind enough to share his knowledge and answer questions about alternative lending options.

Who are the alternative mortgage lenders?

Mortgages from alternative lenders are becoming an increasingly popular option for people living in
Ontario. The major Canadian banks have tightened up their mortgage approval requirements meaning
that more Canadians are being turned down for mortgages. In order to fill this demand for mortgages,
alternative lenders offer mortgages with more lenient approval criteria. Most alternative lenders focus
on the property itself instead of the income and credit score of the borrower. Since these alternative
lenders offer higher risk mortgages, they tend to charge more than banks do. The best way to get in
touch with an alternative lender is to work with a mortgage brokerage that specializes in alternative
lending. One such brokerage is Mortgage Broker Store which focuses exclusively on alternative lender

Why people are turning to alternative lenders?

Most people will seek out alternative lenders after being turned down by a bank for a mortgage.
Alternative lenders are a popular option for borrowers with bad credit or income issues. Alternative
lenders also are able to provide second mortgages and third mortgages when banks cannot. Many
people use alternative lenders as an easy way to borrow a large amount of money to meet their needs.
Some examples of the ways people use the money include: stopping the power of sale, property repairs,
investing in a new business, and paying school tuition fees. In contrast to banks, alternative lenders can
set up a mortgage quickly making them a good source of emergency funding. Many borrowers will take
an alternative lender mortgage to satisfy their short-term needs and refinance into a cheap bank mortgage at a later date.

What Criteria do Alternative Lenders Use?

Alternative lenders have different criteria depending on the type of lender, but they all focus on the
property instead of the borrower. The lender’s key concern is that they are able to recover their
investment if the property were to be sold. Credit unions and trust companies can offer mortgages at
rates just slightly above those offered by banks. However, these lenders have income and credit score
requirements and will not qualify people with serious income or credit issues. For people with poor
credit and income, they may be able to get a mortgage with a private mortgage lender. Private lenders
are individuals or small corporations that invest money into mortgages. Most private lenders focus
exclusively on the equity in the property and can ignore any issues with income and credit. While private
lenders have the most lenient lending criteria, they also charge the highest rates and fees.

What is the Cost of an Alternative Lender Mortgage?

In all cases, alternative lender mortgages cost more than mortgages from traditional banks. Trust companies and credit unions can charge rates as low as 5.3% and have low setup fees. Private mortgage lenders charge rates between 7% and 12% and charge setup fees equal to anywhere between 3% to 8% of the mortgage amount. The key factors influencing the mortgage costs is the equity in the property and the location of the property. Lenders will calculate a metric called a Loan to Value (LTV) ratio to judge the risk level of a mortgage investment. An LTV ratio is calculated by dividing the estimated value of the property by the total value of all mortgages on the property.

How to Find an Alternative Lender?

Finding the right alternative lender for your needs can be difficult as there are so many different lenders and lender types. Some larger credit unions and trust companies advertise heavily and can be found easily via a simple Google search. Most private lenders do not advertise and rely on mortgage brokers to send them clients. If you cannot get a mortgage at a trust company or credit union, you might want to try a private lender. Mortgage brokers such as Ron Alphonso at Mortgage Broker Store specialize in private lender financing. Ron also acts as a private lender on many mortgages where he invests his own private funds.  One of the keys focuses at Mortgage Broker Store is arranging financing to stop the power of sale and foreclosure quickly and efficiently.


To get in touch with Ron, you can call  directly 416-499-2122 or email

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