Many of our blogs focus on mortgage financing in Canada and ways that you can leverage tools and technology to make every aspect of your mortgage lending operation more efficient, our tool being one of them.
What has become an interesting trend in the past year has been how alternative lenders have begun to leverage the very tools used in their mortgage underwriting divisions in other aspects of their operations.
While bank lending is very structured and borrower credit, income and character play a huge role in lending decisions whether it is a mortgage being financed or other product, alternative lenders take a more hands-on approach, often placing as much, if not more, weight on other attributes present in an application – one being the equity in one’s home.
While many A lenders don’t want to face defaults periods, many alterative lenders take on higher risk deals focusing more on how they will get their money in the event a default occurs, rather than trying to avoid lending to people who may default – period.
This means that an applicant who has significant equity in their home, for example, presents a safer investment for an alternative lender than an applicant who doesn’t. This is why an alternative lender may extend mortgage financing to an applicant with bruised credit if equity is present in the home to secure the mortgage.
While this has been occurring forever in mortgage financing, this is a philosophy that some alternative lenders are applying to other unsecured credit products such as personal loans. The philosophy is that someone who doesn’t have significant overall debt and possesses significant home equity is not as high a risk for unsecured personal loan financing as may have been thought in the past.
The question is, how can a lender be certain that a property has the amount of equity the applicant is claiming:
- There are automated tools like Purview which will, at the click of a mouse, provide property value estimates, in addition to revealing outstanding mortgages and liens
- You can request an appraisal of the property if you are still unsure that the value is present
- You can request current mortgage statements from existing mortgage holders directly to ensure that mortgage balances haven’t increased
- You can request a Parcel Register* using Teranet Express to look at the most current data as far as encumbrances registered against a property
Want to be more competitive? Leverage the tools and technology other alternative lenders are using to come up with innovative new products and even unlock the ability to lend to more consumers than you may be able to right now.
For more information on Purview please visit https://purview.ca/.
*An official product of the Ontario government pursuant to provincial land registration statutes.