There are different types of mortgages available to customers in Canada. They can choose one of their convenience based on their needs and plans. They can avail themselves of options, including A lenders and B lenders. Many consider the latter a better option in comparison to the former.
B lenders are fundamentally different from A lenders, usually chartered banks. The difference between B and A lenders is the type of customers and regulations they follow. The target of A lenders is prime borrowers, while B lenders can give loans even in the case of customers with greater risk. If you want to save your money and want an alternative for banks, B lenders can be a good option.
Here is a brief overview of how B lenders can be a good option for home buyers. It is discussed as follows.
What is B Lenders – An Introduction
B lenders are regulated organizations that provide financial services to those looking for a mortgage or other financial services. If we consider the case of Canada, six big banks dominate mortgages and loans services across the country. The total value of Canada’s mortgage market is about $992 billion, and because of the demand in the market, they have strict criteria.
Thus, the market needs a better option to provide mortgage services using less strict terms and conditions. B lenders are the ones who come to the service of the applicants. These service providers also consider stable income and good credit scores, but their process is relieving compared to A lenders.
If you are applying for a mortgage from A lender, the interest rate might be high if your income score is low. The minimum score from CMHC is 600 for insurance. There are other requirements like two-year income and other details for the loan issue. If the income has been fluctuating, then there are chances that the application might be rejected.
If A lenders deny you loans, you can apply at B lenders, who can serve you offering more flexibility. B mortgage companies are becoming a popular choice because of their customer-friendly policies. Here is an overview of their pros and cons.
Pros and Cons of B Lenders
There are different reasons to choose a B lender for mortgage purposes. The pros and cons of B lenders are discussed to help the reader decide which one is in their best interests.
The pros tell of how B lenders can be a good option for customers if we look at the pros.
Alternative Solution
B lenders provide an alternative solution to traditional A lenders. The wide array of choices and lenient comparative terms ensure that the applicant can get their dream house. They can save you from strong terms and conditions as well as the fear of application rejection.
Shorter Terms
The term for a mortgage in the case of B lenders is short-term options like one to three years. This way, they contrast with the traditional A lenders whose loan term is five years. Thus, the user can save themselves from a huge burden.
Leniency
B lenders are comparatively lenient in debt servicing ratio and accept the non-conventional source of income like a bonus, etc., for payment. They make up for leniency by increased interest rates.
Non-Traditional
They are a non-traditional solution to mortgages because of the difference in terms and conditions as well as the method of payment. They accept payments differently from traditional lenders.
Clear Solutions
They offer clear solutions to the problems that are a hurdle in the case of A lenders. They get paid for the solutions they offer to customer problems. They get for their leniency in increased interest rates and more fees, etc.
Higher Pricing
The price for B lenders might be high in comparison to A lenders. Some customers consider this as their con because they are the ones who pay for it.
Property Appraisal
B lenders need a property appraisal before the purchase of it. So, it might be inconvenient to some customers.
Minimum Down Payment
The minimum down payment in the case of B lenders can be high and can start from 20%. It is more in comparison to the down payment in the case of A lenders.
Final Thoughts
It is clear from the discussion above that B lenders can be a better option for those who want to own a home. They offer loans at comparatively less-stricter terms and are flexible. They can also be good for those who don’t qualify for the loan terms from A lenders. The reader can easily choose why B lenders are a great option.