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Mortgage 101 – Special Guest Alex Lavender: Alternative lenders | November 2021 Part 6

In this special episode of Mortgage 101 with Clinton Wilkins and Todd Veinotte, as heard on CityNews 95.7, the guys bring in guest Alex Lavender to take us on a deep dive into alternative lending. The three guys talk about why someone would want or need an alternative lender, how alternative lenders are different than banks, how self-employed borrowers often benefit from a short term alternative lender product, and discuss if more people use alternative lenders now than in the past!

Alex Lavender is a Mortgage Broker with us at Clinton Wilkins Mortgage Team. He grew up in a small town in Ontario of 700 people and continues to carry that small town sense of community here in Nova Scotia. He prides himself with being available to his clients on an individual needs basis and seeking out those unique solutions for, what can be, stressful situations. Anything can happen at any time and Alex can be there 24/7 for his client’s most pivotal financial transactions of their lives. Learn more about Alex and how to contact him here.

Mortgage 101 with Clinton Wilkins & Todd Veinotte: Alternative lenders | November 2021 Part 6

Don’t feel like watching the video? Check out the transcript below.


Welcome, Alex Lavender to Mortgage 101!

Clinton Wilkins: [00:00:00:02] We’re wrapping up our final month, you know, talking about financial literacy and hope, and we really thank everybody for tuning in and, you know, listening to our show today,

Todd Veinotte: [00:00:07:03] We have guests, we do have a guest, and you decided to bring in one of your employees, is that a safe way of putting this?

Clinton Wilkins: [00:00:13:23] Well, one of my mortgage brokers, for sure.

Todd Veinotte: [00:00:15:17] So he works, can you fire him right now?

Clinton Wilkins: [00:00:17:18] I mean, I could. I would never want to.

Todd Veinotte: [00:00:20:05] Why? Because he makes you too much money?

Clinton Wilkins: [00:00:21:20] Well, I mean, that’s definitely a factor. But Alex is like my number one, like protege and like helper.

Todd Veinotte: [00:00:29:20] Protege?

Alex Lavender: [00:00:30:00] I would say I keep him entertained.

Clinton Wilkins: [00:00:31:17] I mean, somebody has to keep me entertained. But you know what? Alex helps me with so much, you know, in mortgage files. I wouldn’t be able to do what I do every day without Alex helping me with, like what I’m doing.

Todd Veinotte: [00:00:43:06] No, yeah, I’m only kidding around.

Alex Lavender: [00:00:44:18] Team environment.

Todd Veinotte: [00:00:44:20] He’s definitely a quality employee. I won’t mention what you’ve said about him when he’s not here.

Clinton Wilkins: [00:00:49:17] I mean, you know, yeah.

Todd Veinotte: [00:00:51:28] Exactly. Segue. So what do you just kind of be Todd Veinotte and take it over because, you know, why not? You ask him some questions?

Clinton Wilkins: [00:00:59:02] Well, you know what? I ask questions all day long, but I’ll do it like a little bit of an intro.

Todd Veinotte: [00:01:03:17] Yeah do an intro.

Clinton Wilkins: [00:01:04:16] Alex has been with us here like over five years. He’s actually had his five year anniversary and he moved here, originally from rural Ontario and, you know, went to university in Toronto and his parents own a restaurant over in P.E.I., and he’d never, ever been to Halifax.

Todd Veinotte: [00:01:18:19] Why isn’t he telling us this stuff?

Clinton Wilkins: [00:01:21:13] Well, because I think I just do a really good roundabout way to do the intro. And he’s a super, super expert in mortgage lending around private lending and alternative lending. And I really want him to give, you know, us and the listeners a really good purview of what that looks like.

What is alternative lending?

Todd Veinotte: [00:01:39:11] Alright, what is alternative lending.

Alex Lavender: [00:01:40:27] Alternative lending is essentially, you know, I’d say if you don’t fit in the traditional box that is alternative lending.

Todd Veinotte: [00:01:46:21] Which is what? What’s the alternative?

Alex Lavender: [00:01:49:21] Why do you have to go to an alternative lender?

Todd Veinotte: [00:01:52:01] Yeah.

Alex Lavender: [00:01:52:07] Per say, well,

Todd Veinotte: [00:01:54:00] Not per say, why do you need to go?

Alex Lavender: [00:01:55:28] Well, main reasons are credit, income, or if you’re new to Canada and you’re not established here yet. So those are the main three reasons. And then private lenders, you know, that’s even a whole other category. And then that’s like, you know, maybe if your house was half built and you ran out of money they’re the lender, that’s going to help with that.

Todd Veinotte: [00:02:15:10] It’s going to be a stressful situation, eh?

Alex Lavender: [00:02:17:02] Yeah, which actually happened to quite a few people.

Clinton Wilkins: [00:02:20:28] I mean, like just the cost materials, Alex, right?

Alex Lavender: [00:02:22:22] Yeah, cost of materials, right? So a lot of people were building, pandemic happened, cost of materials went through the roof. They ran out of money and they needed a little extra to finish it off. So, yeah, that’s, you know, that’s a tricky situation. That’s definitely something that we help with.

Todd Veinotte: [00:02:34:23] How many alternative lenders are there?

Alex Lavender: [00:02:38:13] In Nova Scotia right now, we have five, but in Canada, there’s a lot more than that.

Todd Veinotte: [00:02:42:19] And you have access to all of those?

Alex Lavender: [00:02:43:24] Yep, access to all of them, yeah.

Who goes to alternative lenders?

Todd Veinotte: [00:02:45:13] So what’s a file? How does it look different from a traditional file? What’s it look like?

Alex Lavender: [00:02:53:20] Yeah. So I mean, for someone to go to an alternative lender, I mean, they’re going to have a credit score of like less than six hundred. That’s typically one of two things.

Clinton Wilkins: [00:03:00:20] Sometime. Sometimes they have great credit.

Alex Lavender: [00:03:01:27] Sometimes they do so on the credit side, sometimes it’s less than six hundred. You know, sometimes bankruptcy or consumer proposal plays a factor. Sometimes clients have great credit, but the income on paper is really low.

Clinton Wilkins: [00:03:13:02] Yeah, exactly.

Alex Lavender: [00:03:13:25] And you know, instead of maybe claiming a lot of income on the taxes, you know, we have to go through a stated income program. So I’d say one of the main differences is the cost. So obviously it’s going to cost a little bit more in the down payment is more.

So, no more five per cent downs with an alternative lender, that’s a 20 per cent minimum. And the interest rate is probably about one to 1.5 per cent higher today. And there’s going to be a lender fee as well. That’s about 1.5 to two per cent of the mortgage amount.

Alternative lenders require bigger down payments

Todd Veinotte: [00:03:41:20] So to me, that doesn’t sound out of reach, except for the 20 per cent down payment. That’s going to be really difficult for somebody who’s already got some challenges financially to come up with?

Clinton Wilkins: [00:03:53:24] It would surprise you though. Like, I see some of these files like, I’m on every file that Alex works on, I’m on every file that our team does. And it’s really amazing when you tell somebody they need 20, 25, 35 per cent down, magically, a lot of the time they find it.

Todd Veinotte: [00:04:06:21] Where do they get it?

Alex Lavender: [00:04:08:06] They get it, you know, from family. Sometimes they have other assets they sell. And, you know, quite often you see inheritances. Inheritances? I can’t that word right now.

Clinton Wilkins: [00:04:17:01] Is that a word?

Todd Veinotte: [00:04:17:22] You said it right.

Clinton Wilkins: [00:04:19:17] Inheritances? Maybe it is.

Alex Lavender: [00:04:21:26] Inheritance.

Todd Veinotte: [00:04:21:29] An inheritance.

Clinton Wilkins: [00:04:23:00] Yes. An inheritance. And a lot of big gifts, I think.

Alex Lavender: [00:04:26:05] Yeah. Families give them big gifts, yeah.

Todd Veinotte: [00:04:29:13] So they have to prove, obviously, where the money came from, though? You can’t just say, “Hey, I found this money on the street.”

Alex Lavender: [00:04:35:02] Yeah, cash is not accepted, yeah.

Clinton Wilkins: [00:04:37:22] Cash is not king.

Alex Lavender: [00:04:38:26] Cash is not king, no.

Todd Veinotte: [00:04:40:07] Because of what? What’s the issue?

Clinton Wilkins: [00:04:42:20] Anti-money laundering.

Todd Veinotte: [00:04:43:03] Laundering! Yeah.

Clinton Wilkins: [00:04:45:23] You can wash your clothes, but you cannot wash your money.

Todd Veinotte: [00:04:49:00] There you go.

Alternative lender options for self-employed

Clinton Wilkins: [00:04:49:20] Because I would definitely be wrong. And Alex, why don’t you tell us a little bit about some of the alternative lending that you sometimes get involved with for self-employed people because, you know, there’s more and more people that are becoming self-employed.

You know, one day they’re working for one lender and another day, or not one lender, sorry like one employer. I talk about lenders all day long, like one employer, and then the next day they completely do a pivot, different industry, brand new self-employed. Are there options for those type of people? Because there’s more and more Canadians becoming self-employed every day.

Alex Lavender: [00:05:18:05] For sure. Yeah, I think one of the biggest challenges as well is to go through a traditional lender like a bank. They have to be self-employed for two years and not self-employed just for two years. You have to have two years of good tax returns because the lender always takes the net income of the two most recent years’ tax returns. And if the most recent year is lower, they’re going to take that at face value.

So you see a lot of people were really impacted with COVID because their income went way down. So with an alternative lender, instead of looking at the tax returns, they actually use six months of bank statements instead, and we just essentially state their income on a piece of paper, how much money they make.

Clinton Wilkins: [00:05:53:12] So and, like, that’s backed up by bank statements.

Alex Lavender: [00:05:56:19] Backed up by bank statements. Yeah, and they list their own expenses. And pretty much the bank statements tell the story instead of the tax returns.

Usually, alternative lenders are a short term solution

Todd Veinotte: [00:06:04:01] But if somebody is going through divorce, separation, sometimes they need somebody other than a traditional bank?

Alex Lavender: [00:06:11:17] Yeah. So that’s, you know, a great solution for an alternative lender, for sure. And the thing is the alternative lenders do it on one year terms, so the thing is,

Todd Veinotte: [00:06:20:00] Always?

Alex Lavender: [00:06:20:14] Well, you can go two or three year terms, but the rate’s a little bit higher. But what we do is we put them on a shorter term and then we can review the file each year to try and get them back to a traditional lender.

Todd Veinotte: [00:06:28:26] Do you have to pay new fees if you renew it every year?

Alex Lavender: [00:06:31:17] No, just one time.

Todd Veinotte: [00:06:32:23] Just one time fee.

Alex Lavender: [00:06:33:21] Yeah.

Todd Veinotte: [00:06:33:27] So you renew after that and next year, you don’t have a fee to pay.

Alex Lavender: [00:06:36:20] Correct.

Are more people using alternative lenders now?

Todd Veinotte: [00:06:36:27] I see. The number, or the percent of people fitting into this category is growing or decreasing?

Alex Lavender: [00:06:45:28] That one’s tough to say.

Clinton Wilkins: [00:06:47:12] I would say there’s more. There’s more now than there were before.

Alex Lavender: [00:06:50:24] Yeah.

Clinton Wilkins: [00:06:51:08] You know, mortgage lending at one time, I think, if you had a heart beat you could pretty much get approved. I would say there’s probably more alternative lending situations here now.

Alex Lavender: [00:07:00:08] The rules are getting stricter.

Clinton Wilkins: [00:07:01:11] But yeah, and I think that’s a really good point. You know, when we talk about things like the stress test and things that happen with B-20 and B-21, it took people out of the box that might have qualified with a more traditional lender. And we have these conversations with borrowers every day.

Either, and especially with self-employed people either need to claim more money in your income tax or you’re going to pay maybe a higher rate on your mortgage and they can kind of make the decision on what works best for them and, you know, their accountant and stuff like that.

Todd Veinotte: [00:07:29:23] Alright. So just before we wrap this up, a cautionary tale, although you can find people mortgages through this channel, which is great, try and do everything you can to have your finances in order so that you don’t have to go this route, obviously.

Alex Lavender: [00:07:44:12] Exactly. It’s only going to save you more money in the end.

Clinton Wilkins: [00:07:47:06] Yeah, it’s a good Band-Aid, though. You know? When it’s good, and I always try to say, and I’m sure, Alex, you say the same thing: This is usually a short term solution. How can we get you cleaned up and how can you get it into a better position that we can get you a better financing solution down the road.

Thanks for coming on the show, Alex!

Todd Veinotte: [00:08:02:16] Alex, did you have fun being on Mortgage 101?

Alex Lavender: [00:08:04:16] I did. It was great.

Todd Veinotte: [00:08:05:17] Do you think you’d be allowed back at some point?

Alex Lavender: [00:08:07:11] I think so. I think I behaved myself.

Todd Veinotte: [00:08:08:26] Well Clinton and I will make that decision and we’ll let you know down the road, Okay?

Alex Lavender: [00:08:12:00] Okay, sounds great.

Clinton Wilkins: [00:08:12:15] Thanks for sharing your insights. It’s Financial Literacy Month.

Todd Veinotte: [00:08:15:02] I know I’m only teasing. Alex Lavender, what’s his title?

Clinton Wilkins: [00:08:18:15] Mortgage broker.

Todd Veinotte: [00:08:19:05] Yeah, mortgage broker. Thanks, Alex.

Alex Lavender: [00:08:20:26] No problem.

Todd Veinotte: [00:08:21:10] We’ll be right back.

If you have any questions, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.