10/23/2023
Last week, we talked about different mortgage lenders in Canada. Mortgage lenders in Canada are not traditional banks and online banks, as said on the text books. In real life, they are
1. Charted banks
2. Credit Unions
3. Mortgage financing companies or MFCs
4. Insurance companies
5. Mortgage Investment Corporation or MIC
From this week on, we will talk about each of them. Let’s start with banks for this week.
There are 81 federally regulated banks in Canada, including those big banks that we all see on the streets.
For mortgages lending, big banks’ preferred borrowers are full time employed person with a stable income and solid credit history.
When it comes to self employed borrowers, longer history of taxable income will be requested. This might give some challenge to those clients because their taxable income might be very different from their actual income, due to accountant suggestions.
Smaller banks, however, have more creative solutions for self employed borrowers. Smaller banks understand the difference between taxable income and actual income, therefore willing to take more risks to lend to these clients.
In general, banks are known for their sufficient fund to lend on mortgages. They will not shy away from high price house although their loan ratio will cut back when the house purchasing price is higher than one million dollars.
On the flip side, banks are well known for their high penalty when borrower breaks their mortgages. Be mindful to read and understand their mortgage penalty terms and conditions before signing on the dotted line. This penalty alone, in certain conditions, might cost thousands or even tens of thousands of dollars. When convert that into interest rate, this might be 1% or even 2 % higher.
For next week, we will talk about credit union.
