As a mortgage broker, I meet many clients who have heard the Alpine Credit radio and TV commercials, "Own Your Own Home? You're Approved!" However, is this the financing that you want or that you need?
Alpine Credits is a lender that offers home equity loans to Canadians. You can potentially borrow up to 75% of the value of your home less the balance of your current mortgage. Your income and credit are not a huge factor in the qualification of this financing.
The commercials sound like it's an easy process. "Do you own your home? Yes? You're Approved!" The process involves a little more time and paperwork than these 3 sentences suggest.
Like any application for financing when your home is used as collateral, you will be asked to provide personal details and Alpine Credit will check your credit report and your credit score.
An appraisal will be required (this could cost $300 to $500 depending on where you live). This appraisal is the basis of the financing that Alpine Credits provides. If your home is appraised for less than you expect, then you may not be "approved" for the new loan.
Before we go into too much detail, let's take a look at what you are applying for and if you have other options!
What are the Advantages and Dis-Advantages of Alpine Credits?
When you apply for a loan with Alpine Credits you are applying for a home equity loan. That means you will provide your home as collateral for a loan that they will give you.
Alpine Credits is a lender. Going to them is like going to any specific bank for a loan. The advantage of Alpine Credits is that they are more lenient regarding your income and your credit to qualify for a loan.
There are 2 Main Advantages of Using Alpine Credits for Home Equity Loans:
- Lenient Income & Credit Score Requirements
- Get Your Money Fast
Lenient Income & Credit Score Requirements
If you have non-traditional income, you can qualify. If you have bumped and bruised credit, then you can qualify. As long as you have enough equity available in your home, you can qualify.
Their adjudication process relies more heavily on your home and the equity in your home than your income and your credit.
One of the first things that Alpine Credits will do is complete an appraisal on your home, at your cost. Depending on where you live, that appraisal could cost you $300 to $500.
Get the Money Fast
Another advantage that Alpine Credits offer is speed. They will approve your fast and will get you the money fast. If you need cash quick, they are happy to help (provided you qualify).
With the speed advantage, there is a downside! The rates for equity lenders like Alpine Credits are higher than you would receive at a bank or credit union.
Let's Review the 4 Dis-Advantages of Alpine Credits:
- Higher interest rates than traditional banks
- Higher closing costs
- Are you sure this is your best option?
- Can only finance up to 75% of your home's value
1. Higher Interest Rates
Interest rates for a second mortgage typically range from 12% to 16% plus fees.
2. Higher Closing (Set-Up) Costs
The fees would include legal fees to register the mortgage, appraisal fees and closing fees (lender/broker fees).
3. Do You Know This Is The Best Deal For You?
As a mortgage broker, I am biased! I see clients going directly to a bank or lender all the time. Most of the time, they get a fairly reasonable deal. Sometimes, I can get a better deal and sometimes I can't.
In the case of private financing, I can often find options that are better for my clients. Sometimes Alpine Credits is the only lender who would finance my client. Sometimes, they have the best offer for my client, but I have checked many before I come to that conclusion.
As a client, if you go directly to Alpine Credits you might get the best deal that's available to you. However, there may be other options that you were not aware of.
I love their advertising. Some of the commercials are goofy. Their videos are excellent! Sometimes their financing is very good for a client, but sometimes there are much less expensive options.
4. Borrow Up to 75% of the Value of Your Home
Another dis-advantage of working with Alpine Credits is that you can only borrow up to 75% of your home's value.
Traditional banks, like TD or RBC or BNS, etc., can only finance up to 80% of the value of your home (less your current mortgage), provided you have good credit and can confirm your income to their satisfaction.
Alpine Credits, on the other hand, is a private lender but will only finance up to 75% of your home's value.
There are other private lenders who will consider 85% and some will even finance as his as 90% of the value of your home. With these other private lenders, you get access to much more equity than Alpine offers.
Client, Second Mortgage, Example.
I recently met clients who were considering financing with Alpine Credits. Their bank had turned them down. Their income situation had changed substantially. They were close to max on their credit cards and weren't sure they could make the next mortgage payment.
A friend of theirs, his boss actually, suggested he speak with me. I met with these clients and reviewed options. Instead of a second mortgage, I was able to get them a very good first mortgage with a very good interest rate. They paid out the existing mortgage, paid out all their debt. They also received some cash to help with this tough time (a little $10k emergency fund).
Overall their payments went down to $100 less than their original mortgage payment. They could afford all their payments now. Once things turned around for them, then they will have lots of extra cash flow.
If these clients had called Alpine Credits first, then their payments would have been $800 per month more than the original mortgage payment. They would have also paid much more in fees and wouldn't have a little extra cash in their bank account for emergencies.
As a borrower, if you go to one bank, then you just don't know what you don't know. The bank you approach will not tell you that you should have talked to a lender across the street. You just won't hear that.
What are Alpine Credit interest rates?
Alpine Credits interest rates for second mortgages, home equity loans, will range from 10% to 18% including fees. Because they fund the mortgage fast and don't care too much about your credit or your income, then you pay a higher interest rate.
For some clients, this is the best financing that they will qualify for. For some clients, they won't even qualify with Alpine Credits. Your ability to qualify will depend on how much equity you have in your home and how bad your credit is.
For some clients, this is very expensive financing and an option they should not consider. For some clients, there are slightly less expensive options. For some clients, there are much less expensive options.
As a broker, I've said it before, I'm biased! If you have heard the commercials and are thinking about getting home equity loan financing, then speak with a mortgage broker.
Is it better to refinance or get a second mortgage?
When clients are looking for a home equity loan, most of the time a second mortgage is a better option. When you consider whether it's a better option to choose a refinance or a second mortgage, it's important to review the costs.
To determine if a refinance or a second mortgage is better, compare the penalty to break the first mortgage versus the set up (closing) costs of the second mortgage. All else being equal, a second mortgage will have a higher interest rate and higher closing costs. A refinance will have a lower interest rate but a penalty.
If the refinance is completed at the end of a term, then no penalty would apply, then the refinance is most likely to be better.
5 factors would make a second mortgage, through Alpine Credits or any other private lender, a better option than a refinance:
- Your credit score
- Your income
- The penalty to break the current first mortgage is very large
- You need financing over 80% of the value of your home
- You need the money fast, less than a week
1. Your Credit
Your credit score is one of the most important factors for getting financing. Whether it's mortgage financing or any kind of loan. If your credit score is below 600, you aren't going to qualify for a mortgage with an "A" lender (a lender like TD or RBC or CIBC or National Bank or BNS, etc.)
Credit gets bruised for various reasons. If your credit is bruised, then a second mortgage may be a good option. You can use a second mortgage to get back on track financially. You will have a year or two to improve your credit and then get a new mortgage when the second mortgage matures.
I have helped many clients who've had something happen that bruised their credit. We arranged a second mortgage, paid out debt and improved their cash flow. Two years later, they are back with an "A" lender at preferred rates.
2. Your Income
If your income has changed or is no longer enough to qualify with an "A" lender, then a lender that offers second mortgages like Alpine Credits will consider your application.
Many of the private lenders like Alpine Credits look at cash flow. If the cash flow that you are receiving, no matter the source is reasonable and sufficient to pay your debts, then that's all they.
3. The Penalty To Break The Current First Mortgage is Very Large
If you have a mortgage with one of Canada's big 5 banks, the penalty to break the mortgage can be substantial. Their penalty calculations are the least favorable to clients, unlike many of the Monoline Lenders (who are funded by the big 5 banks).
A Monoline Lender is a lender that deals only in mortgages. They have investors who provide them with money to lend out mortgages to Canadians. Monoline Lenders don't have local stores or locations and lend money through mortgage brokers.
One thing I want to note. If the penalty is large, then the first option to consider before a second mortgage would be a home equity line of credit or HELOC in second position. A HELOC would require excellent credit and traditional income confirmation to qualify.
If you don't qualify for a HELOC behind your existing mortgage (in second position on title), then a second mortgage is the next option.
The interest rate on a HELOC is typically priced at the lender's prime lending rate plus 0.50%. A second mortgage would be priced at 10% to 18% depending on your credit and how much you want relative to your home's value.
4. You Need Financing Above 80% of the Value of Your Home
The big banks and Monolines can only lend up to 80% of the value of your home when they refinance the mortgage, if you want more than 80%, then a private lender is your next option.
In some circumstances, I have helped a client refinance up to 80% of the value, then the interest rate is best for the largest part of the mortgage. For the extra funds required we set up a second mortgage.
This way the fees and interest costs were minimized and the clients were still able to get the money the needed.
Everyone's circumstances are different and it important to look at all your options before you decide to proceed with one solution.
5. You Need the Money Fast, Less Than a Week
If you want to refinance your mortgage with an "A" lender, then it's going to take some time. If your broker, or lender, has everything they need and all the stars line up they could set up a new mortgage in 2.5 to 3 weeks.
If you want the money in under a week, then a private lender is your only option. Even if you have excellent credit and excellent income, a traditional "A" lender will not move that fast.
I had a client who had an opportunity with his business. He needed $200k fast and his business didn't qualify. This investment was for a short term and he would pay it off in 9 months or less. We set up a private mortgage for him and he had the money on hand within 2 days.
Alpine Credits could have been an option for this client. They would have approved this loan. We had other investors who didn't ask for an appraisal and funded faster, so the client chose not to proceed with Alpine Credits.
The interest rate the client paid higher that with an "A" lender. There were additional lender fees and broker fees, but the $200k second mortgage allowed this client to make $300k in 9 months. For him, the rate and fees were a reasonable expense to generate a great return.
We also set up a credit facility when the second mortgage was paid out so that if a quick deal happened again in the future, he had financing at much lower rates, set up and ready go.
To access the equity in your home, you can choose a Home Equity Loan either through Alpine Credits, or chat with a mortgage broker. We would be happy to review your options. We work with many different private lenders.
Alpine Credits will offer you one solution. In some cases, the solution they offer is the best deal you will get. However, the deal they offer may not be your best option.
Especially when you are delving into the private financing market, it's important to know your options. Every private lender is different. Every private lender will look at things differently.
Every private lender will price the financing differently. Unless you are working with a professional who knows many different private lenders and knows who offers what depending on different circumstances, then you are throwing darts in the dark.
Private financing can be expensive. Know your options and choices before you sign on the dotted line. Connect with us and get a better picture of your options.