I have worked in mortgages in Ontario since 2004. Over the years, I have specialized in Alt-A lending, alternative lending, private lending, business-for-self mortgages, consolidation loans, refinances, new home construction lending, modular construction lending, marital division of asset mortgages, mortgages for estate settlements, mortgages in a company name, and private mortgage investments.
When you hit a snag with your mortgage renewal or refinance, when you have credit problems or cash flow problems, or when you need a private lender or a private mortgage, please consider this advice.
Don't panic. Like a plumber with a faucet failure or a mechanic with a muffler malfunction, it's your broker's job to deal professionally and expediently with your mortgage emergency. A mortgage broker takes in training and materials every day from dozens of lenders. A mortgage broker possesses detailed and current information about the options that are available to you. Don't rush in to a private mortgage that you found online overnight. Take a day and find a broker that is a good match for your personality and circumstances.
Work with someone who knows the local market. Alternative lending requires the broker to dig in to your situation. Can it be uncomfortable to have a local broker know your personal struggles? Yes. But a local broker knows the local lenders, lawyers and appraisers. A local broker can put together an accountable team that will be there for you. An out-of-town broker, lender, and lawyer may not feel the same level of personal accountability toward you. A local broker will need to be able to meet your eye at the hockey game or grocery store. That local accountability can make a huge difference in dollars and cents over the term of a mortgage.
Tell your broker the whole truth. A broker can do their best work for you when they fully understand your situation. Your broker should know everything that could come up as a surprise at the lawyer's office.
If your broker asks for a document, provide it. These days lenders are requiring a complete file before they will commit. The more documentation you can provide up front, the quicker you will get a solid answer. And the better your documentation is, the better your broker can do for you in terms of lender selection and pricing. Consider it a pay-yourself-first sort of situation. If you do the documentation work now, it will come back to you later.
Work with someone who understands how to get you out of that private mortgage. A broker should craft an achievable exit strategy for you that brings you back to traditional lenders. Your broker should have a provable track record of taking clients out of private loans and back to the banks.
Work with someone who provides you with complete fee and cost disclosures up front. Over the years I have seen borrowers placed in a private loan with excessive costs and fees. Most alternative mortgages and private mortgages will have a high APR - but when your fees alone are in excess of 10% of the loan, it's time to get a second opinion.
Get a second opinion! I know it's never fun to talk about money problems with your friends and family. Find a trusted person - like your lawyer, your accountant or with whom you can discuss the mortgage offers that your broker has presented to you. (You could even ask an experienced broker like me to review the offer.)