Lending Options
Types of Solutions | Types of Lenders |
|---|---|
"A"Tier Lending Options (Best Rates) | Banks, Credit Unions and Non Bank Lenders |
"B"Tier Lending Options (Flexible Solutions) | Banks, Credit Unions and Non Bank Lenders |
"C"Tier Lending Options (Flexible Solutions Plus) | Mortgage Investment Corporations and Private Funds |
A-Tier
A-Tier Lending Options generally offer the best rates and terms
B-Tier
"B" Tier Lending exchanges lending guideline flexibility for a higher cost of borrowing.
“B” lenders are quasi-regulated and follow a set of lending guidelines and principles that mirror what one might call common sense lending principles. If the deal makes sense (to the lender), it is considered.
Many “B” lenders also provide an “A” lending side intended to eventually work with their clients who may have started on the ” B” side initially.
The irony of "B" Lenders is that much of the funds used to fund these mortgages come directly from the big banks.
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C-Tier
For files that don’t fit on the “B” side, there is a “C” Tier, often referred to as Private Lending. While Private Lending offers the most flexible lending guidelines, the deal must still make sense. This type of financing is generally intended to be short-term with a clear exit strategy.
Private lending is often used as part one of a two-step lending plan. The first step is to close the transaction, and then the second round of financing is used to payout the Private Lender.
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How it Works
"B" and "C" Tier lenders operate their business under the premise that as time passes, most clients are likely to become stronger on paper and be in a better position to revisit A-tier lending options. Most "B" mortgages are issued for 1 to 3-year terms, while "C" Tier lending is usually for a one-year term. These types of lending options (in large part) exist to give the client enough time to resolve whatever issues are preventing us from having their application approved at the best rates and terms at the moment.
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This side of the lending industry does not generally advertise interest rates and fees. Instead, the lender reviews the client's mortgage application using a risk-based matrix, and financing options are offerred based on the strength of the application. The riskier the application is perceived to be, the more expensive the cost of borrowing is.
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It's important to note that people from all walks of life use "B" and "C" Tier lending solutions. Even professionals such as Doctors and Lawyers (for example) that traditionally have a stronger lending profile can struggle to secure A-Tier financing solutions for any number of reasons.
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For the last number of years, A Tier lenders have continued to see their "lending box" shrink as more business continues to be pushed to the "B" and "C" lenders as both the banks and the government continue to tighten up on policy and guidelines.