The strategic side to alternative lending

Mortgage brokers have no shortage of lender options. More choice should make finding a mortgage solution easier, however, for many brokers, it can have the opposite effect.

Every lender comes with different products, pricing, guidelines, and nuances. Add alternative lenders into the mix, and the challenge isn't just knowing who will fund a deal. It's knowing when to use which option and why.

Private and alternative lending was once seen primarily as a last resort. Today there's a growing opportunity for Mortgage Brokers to leverage this flexibility more strategically to solve timing, preserve favorable existing financing, access equity, or give the client the time they need to reach their next step.

That's an important distinction in alternative lending, where financing may only be needed for a few months, or even a few weeks. For Mortgage Brokers, the real opportunity is understanding what the client is trying to accomplish and then looking at the numbers in that context.

Maybe a real estate investor has found the right property but needs to close quickly. A homeowner could have plenty of equity but needs another year before they're ready to refinance conventionally. Or a client may already have a great first mortgage they don't want to give up but needs access to additional capital.

This is where Calvert Home Mortgage Investment Corporation believes mortgage brokers can bring more strategy to the conversation.

Start with the exit

These aren't necessarily clients who need a permanent alternative mortgage. They may just need the right financing for this particular moment.

This is where starting with the exit becomes critical to the solution. The client’s end goal, how long they need the financing and what needs to happen next should all influence how the deal is structured.

A four-month plan can become six months. A sale can take longer than expected. A refinance can be delayed. Building flexibility into the financing from the start can help keep a temporary solution from becoming an expensive one. When the financing supports the client’s bigger goal, everyone wins: the client has a clearer path forward and the broker builds a relationship that can extend well beyond one deal.

The real cost of financing

Comparing an alternative mortgage rate directly with a conventional rate doesn't always tell the full story. How long the financing is needed, how it's structured and what it allows the client to accomplish all matter.

If financing is only needed for four months, for example, what will it actually cost over those four months? And what could waiting for a lower-rate option mean for the client's plans?

For a real estate investor, moving quickly could mean securing the right property or completing renovations in time to refinance or sell. For a homeowner, short-term financing could bridge the timing gap between buying and selling, or provide the flexibility needed to transition to traditional financing.

Calvert Home Mortgage has built its approach around flexibility, creative problem-solving and strong mortgage broker partnerships, with teams working together to uncover opportunities within a deal, whether that means structuring a blanket mortgage, preserving an existing first mortgage or finding another way to make the numbers work for the client's next step.

Structure can change the numbers too. A client with an attractive first mortgage may be better served by keeping it in place and adding a short-term second rather than refinancing the entire balance. Looking at the blended cost overall can give the mortgage broker and client a much more useful comparison than looking at the second mortgage rate on its own or at refinancing an entire mortgage.

“A good mortgage broker isn’t just finding their client a mortgage for today. They’re thinking about where that client needs to be six months, a year or two years from now,” says Jesse Bobrowski, VP of Growth at Calvert Home Mortgage. “Our role is to work alongside our partners, bring our lending experience to the conversation and help find a path that gets their client where they want to go.”

Putting alternative lending to work

As the real estate and mortgage markets become more challenging, straightforward deals may be harder to come by. For mortgage brokers, that makes the ability to solve more complex needs more valuable.

Using alternative lending strategically doesn’t mean knowing every product or guideline. It means recognizing when a different approach could help and having a lending partner who can work through the options with you.

At Calvert Home Mortgage, we want brokers to bring us the story. What is the client trying to do? What’s getting in the way? And where do they want to go?

“In this market, you’re not going to win every deal with the obvious solution,” says Jesse Bobrowski, VP of Growth at Calvert Home Mortgage Investment Corporation. “Sometimes you need a lender who’s willing to dig in, ask questions and look for another way forward.”

The best mortgage brokers don’t have every answer. They have the right partners to help find one. In a competitive market, that ability to find a way forward is what sets them apart.

This article was provided by Calvert Home Mortgage Investment Corporation