Now that you’ve completed your crash course on mortgages, it’s time to move on to who will lend to you and how will you convince them to lend to your group.
This can be challenging but it is possible. As with every step in the process of co-ownership, you need to be prepared. This section will look at the types of lenders available to you and your group. Keep in mind that not every lender will consider co-ownership and those that will may come with some fees.
Who Will Lend To Your Group?
Some banks are not ready to embrace co-ownership in real estate. Other options exist, and you can look to other lenders who are more comfortable with the (perceived) risk of co-owned real estate mortgages, and will offer more favorable rates.
| Type of Lender | Service Offering | Regulatory Oversight | Considerations and Notes |
|---|---|---|---|
| Banks | For-profit financial services such as investments, savings, credit and loans |
Federal | Use a discounted rate calculation to determine the penalty when breaking a fixed rate mortgage. This can dramatically increase your penalty |
| Credit Unions | Non-profit financial services such as investments, savings, credit and loans | Provincial | Use a discounted rate calculation to determine the penalty when breaking a fixed rate mortgage. This can dramatically increase your penalty |
| Monoline mortgage lender | Mortgage loans only, and can only be accessed by a mortgage agent / broker |
Federal | No discounted rate used for penalty calculations which can save a client money if breaking a mortgage early Can only be assessed through a mortgage agent or broker |
| Alternative Mortgage Lenders | Mortgage loans only | Federal | More flexible guidelines than most lenders Higher rates than other lenders. May also have a fee to apply |
| Private Lenders | Small independent loans | Federal | For short term solutions only when no other solutions exists Higher fees and higher rates |
What Will A Lender Be Looking For?
A lender will want a completely full financial picture for every one of the members of a purchasing group. The following questions must be answered:
What do you owe?
Debts, Loans, Credit Cards, Taxes, Other Mortgages
What is your credit behaviour?
Credit History, Credit Score
What is your down payment contribution? (and where is it coming from?)
Savings, RRSPs, Gifts from family members
What will your income be?
Salary, Bonus, Commissions, Pensions, Hourly, Employer
Check out the next part where we cover how you can compile all this information to present to your lender.
How Do You Build Your Financial Model?
Click on the sections below to learn more.
What are all the Steps to Becoming a Co-owner?
Click on the links below for all the blog articles related to each step.
“It’s rare that each member of the group has the same to offer towards a purchase, whether it’s equity or monthly payments. Balancing out the difference is another step in the process.”
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