It starts with asking clear and incisive questions, says Neighbourhood Holdings executive
This article was produced in partnership with Neighbourhood Holdings
Fergal McAlinden, of Canadian Mortgage Professional, spoke with Jared Stanley of Neighbourhood Holdings about how brokers can best advise their clients on alternative financing.
When it comes to advising clients on alternative mortgage solutions, the value of education is clear – both in terms of brokers having a wide knowledge base and using that to provide customers with the best available information, according to Neighbourhood Holdings’ Jared Stanley (pictured).
The company’s senior director of originations told Canadian Mortgage Professional that the ability to ask the right questions was one of the most valuable skills in a broker’s possession to deliver the ideal alternative solution for each client’s specific needs.
That means that instead of simply listing the various options available to a client, it’s best for brokers to start their conversation by asking one or two incisive questions that help them understand exactly what they’re hoping to get out of the financing – and, crucially, which solutions may not be the right choice for them.
“Asking questions is critical, because you can uncover what’s important to your customer and then give them the information they actually need to achieve their objective,” he explained. “As a broker, you’re playing that role where you need to provide them with direction, coaching, and mentorship.
“To do that, you need to ask questions and learn what they need. You want to find the solution that best fits them. It doesn’t matter if the financing is with an A, B, alternative, or private lender – if the solution isn’t right for their situation, it’s the wrong solution. You can only find the right solution by asking questions.”
Take a client put into a five-year fixed term with a bank because it was the lowest rate. Halfway through the first year, to the broker’s surprise, the client calls and says they completed the renovations and are selling the property; this client will face a steep penalty for breaking the contract early. Stanley said that in this case, a fully open alternative solution with a higher rate might have been a better option for the client.
“Overall, you’re trying to minimize borrowing costs,” he said, “and borrowing costs do not equal just the interest rate.”
Such a scenario is why it’s doubly important for brokers and agents to gain a clear idea of the customer’s long-term goals – and, crucially, to ensure that the client understands exactly the plan that the broker is laying out for them to fulfil those aspirations.
“The core of it is educating yourself on the customer’s needs and what they’re trying to achieve. The next part is educating them on how your plan will work,” Stanley said.
That’s particularly relevant in situations where clients are unable to qualify for a conventional mortgage, meaning the broker can then take them through the process to secure alternative funding and eventually progress to their end goal, financing through a bank.
“It’s about saying, ‘If you really want your home today, you can get it with alternative financing. This is a temporary solution, and we’ll get you in the door to bank funding through clear steps,’” Stanley explained.
That adds value to the mortgage broker role because it allows them to add that coaching element for their client throughout the duration of that journey to the bank space, he added, helping customers move forward through mentoring and repeat contact at regular intervals.
“It’s like climbing a mountain with a guide,” Stanley said. “We can get you to the top, but we’re taking an alternative path with clear trail markers and milestones. We will check in with you at each milestone to see how you are progressing and provide you with guidance.”
The focus on education is crucial in an ever-changing mortgage environment like that of today, with borrowing costs rising and property values facing an unpredictable future.
That could involve brokers recommending that clients put more than their minimum down on a property purchase in an alternative deal, Stanley said, because a lower property value down the line can affect an exit strategy.
“Depending on the situation, I might recommend putting a little bit more down so that the transition to a bank lender is easier because if prices were to come off 5% or 10%, then a lower loan-to-value gives you that buffer,” he advised.
Ultimately, mortgage brokers are the experts their clients need on the market – but Stanley emphasized that Neighbourhood is always eager to provide those mortgage professionals with guidance on specific aspects of the alternative space.
“One of the things that I think brokers can do that really helps them out is speak to their BDM or underwriter about their client’s situation and ask what would be the most cost-effective pricing option,” he said. “We’re here to help you be your client’s hero.”
Jared Stanley is senior director of originations at Neighbourhood Holdings, a lender across Canada’s alternative space with headquarters in Vancouver, British Columbia.