What Are Private Mortgages?

• October 25, 2022

A contract broker is a mediator between a budgetary institution that offers advances and an individual attempting to borrow money. The contract broker will work with both parties, collecting and verifying the fundamental printed materials the loan specialist needs from the borrower in order to arrange the loan. A contract broker ordinarily works with numerous banks and can offer an assortment of advance choices to the borrower they work with.

What Is a Mortgage Broker?

A mortgage broker is a professional who guides a client in their search for financing. As an independent broker, he is affiliated with a mortgage agency that is not owned by a financial institution or an insurance company. In fact, these Quebec mortgage agencies are mostly SMEs.

Do not confuse the mortgage broker and the mortgage salesperson. The latter is an employee of a financial institution that only offers their own products.

The service is free since the mortgage broker is remunerated by the lender after the conclusion of the mortgage with the notarized deed.

What Does a Contract Broker Do?

A contract broker points to total genuine domain exchanges as a third-party middle person between a borrower and a loan specialist. The broker will collect data from the person and visit different banks in order to discover the best potential advance for their client. Ultimately, the broker serves as the advance officer; they collect the necessary information and work with both parties to induce the credit closed.

What is a second mortgage?

A second mortgage is a loan taken out on a property with an existing mortgage. It provides access to the equity available in the property, often at a lower rate than most other types of loans. For this reason, second mortgages are a popular way to borrow significant sums of money relatively quickly, if needed.

What are the advantages and disadvantages of obtaining a second mortgage?

First, the disadvantages:

• From the lender’s perspective, second mortgages are risky because the first mortgage will be paid first if a property is taken into possession after a default. For this reason, second mortgages have higher interest rates.

However, there are quite a few advantages:

• If your first mortgage has a favorable interest rate, getting a second mortgage may be the right decision when funding home renovations, consolidating debt, or lowering monthly credit card payments.
• Even though they typically have higher interest rates, second mortgages are usually cheaper than other types of personal loans.

Debt Service Ratio Analysis

Your lender or mortgage broker/agent must ensure that you can afford a mortgage. To do so, they will do a debt service ratio analysis (a comparison of your debt to your income) to see if you can afford the mortgage you want.

Most lenders will require that your monthly housing costs (gross debt amortization), including mortgage payments, property taxes, condo fees and heating charges, do not exceed 32% of your gross monthly income.

They will also want to check if the total monthly amount of your debt, such as loans or car rentals and credit card payments (total debt), does not exceed 44% of your gross monthly income.

Why deal with a mortgage broker?

1. Independence: A mortgage broker has access to nearly 15 lenders and can choose the best terms for your clients. For more complex cases, there are alternatives such as Type B loans or even private loans that will help your client recover financially and return to a lender with better terms. Thanks to the volume of transactions, its negotiating power is greater than that of the client alone vis-à-vis the lenders.
2. Expertise: at each stage of the financing process, the mortgage broker will provide clients with expert advice leading to their mortgage financing. Its role is to explain the nuances of the various products on the market.
3. Continuity of Service: the broker works in partnership with the advisor to take over the mortgage financing component. Its customers will enjoy a continuity of service. They will not find themselves at a bank branch, interacting with a stranger who is unfamiliar with their situation.
4. Integrated Financial Planning Advice: The broker is focused on meeting the financing needs of your clients. After analysing the balance sheet, they will find the balance between asset and liability management.
5. Cross-selling: by examining assets and liabilities, the mortgage broker will be able to return to the advisor with sales opportunities for other products such as HBP loans, investments or services such as property and casualty insurance. There will be no unfair competition on his part. The mortgage broker remains professional and will under no circumstances solicit clients for life insurance or investments.

The mortgage agency is committed to acting with integrity and transparency. In addition to serving their clients, brokers have extensive experience partnering with advisors who refer their clients. Lenders appreciate the quality of the financing requests made by brokers who are less risky for them because their files are known. Files are submitted according to the specific criteria of each lender, therefore it is easier to verify and approve the file.

Mortgage brokerage is a well-regulated profession regulated by the Organisme d’Autoréglementation du CourtageImmobilier du Québec (OACIQ). The OACIQ ensures consumer protection. A mortgage broker after obtaining his title is subject to specific conditions set out in the Real Estate Brokerage Act.

In partnership, the mortgage broker can help your client safely enjoy the best private mortgages financing conditions.