As the market place becomes more and more competitive, some lending institutions must scramble to get their mortgage money out. The demand for mortgage money is strong, so for the mainstream lenders this is not a problem.  Fringe lenders however need innovative products to get rid of their deposit money.  Lending institutions as a whole take in money from Consumer deposits.  If the money just sits in the lenders coffers, no interest is made therefore none can be paid to the deposit holder (Consumer).  Fringe lending institutions try to find a niche in the market place so they can get their money out, and hopefully get it back.  Let me share some new products with you:

NO INCOME QUALIFIER

Some Consumers don't make the income necessary to qualify for the amount of mortgage they require.  Their credit may be excellent, their job stability may be admirable, but their visible income is too light.  With 25% down, five year mortgages are available as low as 7.99%   As an example, let us suppose Frank makes $35,000 per year.   His alternate payment debt load (other than the mortgage payments) accounts for 10% of his annual salary. He wants to buy a $150,000 home with $40,000 down.  If you go to my website, you can calculate the maximum mortgage for Frank at around $78000.  He needs $110,000 (that's $150,000 purchase price less $40000 down).  Most lending institutions would reject the application even though his credit is perfect. Frank can now pretend he makes enough money to qualify, because of his excellent credit and his down payment. With only 20% down, the interest rate would climb to 8.95%, and with 15% down, 9.99%.  These latter two sources of money also charge a fee that would be roughly equivalent to the fee you should be paying to Canada Mortgage & Housing.

NO MONEY DOWN

For years Consumers have read books and watched TV pitchmen announce 100% financing.   It was always difficult to get one lender to do the financing, unless that lender wanted to "unload" one of its own properties.  Although I  have provided this service for some time, I always had to break down the financing into three distinctive parts: 75% first mortgage financing, an additional 15% by way of a second mortgage, and finally the last 10% by way of an unsecured line of credit.  The rate of interest and the amount of payment was always tough to swallow, because of the short amortization on the line of credit portion. Today, 100% financing is available to potential home owners with impeccable credit and a good salaried job.  The interest rate is below 10%.  As an example, Anita has been with a high tech firm for 4 years.   She has received shares of the company as part of her income for the last three years.  As long as she keeps her shares within the Company, the Company will match whatever shares she has on December 31 each year, as a bonus.  She wants to buy a house but if she collapses her shares for the "normal" down payment, no more bonus!  This is an ideal situation for 100% financing, on one mortgage.  She can keep accumulating her shares, move into the house without a down payment, and when she has enough shares to payoff the house she can do so.  The debt service ratio with this lender is also higher than the norm at 40% of gross income.

ALL INCLUSIVE MORTGAGE

Another lender offers to pay for your legal fees, appraisal fees, land transfer tax, and normal closing costs at a five year rate of 7.94%. In other words, you need only the 5% down, the rest of the stuff is already paid.

Next week, more innovative products!