4 Dec

The Easy Option, Part 2. When easy isn’t an option.

General

Posted by: Jonathan Barlow

Mortgage financing

My other job…

Most of the time, the major selling point for a Mortgage Broker’s services is the proposition that we give you options. I’ve used that reason myself when talking to people about my role.

Well, that is true, but its not entirely accurate. A better line would be something like: We find the right mortgage option for your unique need.

The problem is that that line requires more explanation, but the explanation turns out to be worth it.

While all mortgages are essentially the same, borrowers and lenders are not. Most of the time, a mortgage application addresses not just one but several layers of risk. Each lender has a different set of risks they will tolerate. All of them have a specific list of risks they are okay with and ones they are not okay with. The ‘risks’ are also broken down into property risks and borrower risks.

By way of an example, let’s look at Amir who banks at the Red bank and Ali, who has been talking to a mortgage rep at the Green bank. Both have re-located to Canada under work programmes and have applied to Landed Immigrant Status.

Amir gets a pre-approval, then goes on a hunt with his realtor for a new home. He puts an offer in, accompanied by a healthy deposit. One day before his financing condition is to be removed, the Red bank advises him that they cannot approve the mortgage because it is for a leasehold property. The bank representative he spoke to was not aware that they would not finance leasehold properties.

Often, even the representatives of the financial institution may only be partially aware of their own lenders risk tolerances. If you then layer on multiple risks, such as being New to Canada as well as a leasehold property, it may be too much for your favourite institution to handle.

Back to our story, Ali subsequently makes an offer on the same piece of property and as soon as the offer is accepted, meets with his Green bank rep to get the application process underway. This time, the application is rejected as well, but not because of the leasehold. Instead it’s because the Green bank does not have a New to Canada lending programme that fits Ali’s situation.

Its not always one of each type of risk that causes the trouble either, sometimes it can affect an individual borrower with two or more types of risk – for example, someone who is self employed and also separating from their spouse.

So really, a Mortgage Professionals message is yes, we’ll provide options but we’ll also find the right option that works for each individual, because we’re all well, individual. It’s our superpower.

And finally, YES, the stories of Amir and Ali is true! If you’d like to know what the option I provided both of them is and the eventual outcome, just give me a call.