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The choice of mortgage lenders for residential real estate buyers

Given the rapid rate at which mortgage rules change, Alberta residents may want to gain full knowledge before choosing a mortgage lender. Purchasing residential real estate is a significant transaction, and it is not something most individuals do more than once or twice in their lifetimes. The circumstances of each potential homebuyer differ, and knowing the pros and cons of each available option can have long-term benefits.

The most obvious choice for many is to use the banks with whom they conduct all other financial business. Having all one's borrowing under one roof may be beneficial; however, penalties on failed mortgages are more severe. In addition, other loans can be tied to mortgages, making moving the mortgage to another lender complicated. Lenders sometimes market mortgages through brokers, also called monoline lenders, who have several options to offer a potential buyer. Lower penalties may be a pro, but dealing with the lender through online portals, emails and telephone calls rather than in person may be a disadvantage.

Alternative lenders are the third type of mortgage lenders who have a niche product to offer borrowers whose circumstances fall short of the guidelines for qualification with banks or monoline lenders. Avoiding insurer premiums for mortgage defaults through this option is a pro, but high rates and a possible lenders fee can be cons. Homebuyers who meet none of the guidelines -- those with damaged credit or without established credit, no guaranteed income, prior bankruptcies, foreclosures or tax arrears -- can use the services of private lenders. Although these lenders may be the only option for some, a substantial amount of equity will be required, and fees and interest rates will usually be very high.

Buying residential real estate is a major financial event in the lives of many Alberta families, and the choice of mortgage lenders will have an impact on their financial stability for many years. For this reason, many potential homebuyers choose to utilize the skills of an experienced real estate lawyer. The support and guidance of such a professional can be an invaluable advantage in any real estate transaction.

Source:, "Learning about the different types of mortgage lenders", Pam Pikkert, Accessed on Nov. 14, 2016

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