With the banks dropping mortgage rates to historic lows, many homeowners who were in mortgage trouble are looking to get a breakthrough and perhaps reclaim their homes. However, due to tough lending criteria by banks, this drop in interest rates seems like it an opportunity that could pass you by.
If you have received a demand letter from the bank or a PLA Notice, it’s hard to negotiate with the bank. You need a rescue plan before the window closes. After all, everyone knows that the interest rates will eventually come up again sooner or later.
What are your options? Can second-tier lenders help rescue your mortgage?
Trying Another Bank May Not Yield Much
You may be considering to try another bank for a refinancing deal. But that’s a far-fetched ambition. Each bank has unique lending criteria. But there is a common trend among mainstream lenders. Chances are if your bank wouldn’t give you the audience, peer lenders will also reject you.
Second-tier lenders or alternative mortgage lenders are an option you should consider.
Previously, these institutions were considered as the “lenders for the bad creditors.” But that’s far from the truth. They are just alternative lenders.
Who is a Second Tier Lender?
Second-tier lenders are institutions, other than banks or credit unions, that can lend to the public but are not regulated by the Reserve Bank. They, like all other lenders, must still conform to the consumer protection laws and regulations. So, you can rest assured that there’s nothing dodgy about them. However, these institutions are often funded privately (or by specific interest groups).
That means, second-tier lenders, unlike banks, don’t rely on customer deposits to lend to borrowers. Private investors take up that role.
This deviation from the traditional banking formula accords second-tier mortgage lenders more flexibility, unlike conventional lenders and banks. However, it also means that they are limited in size, thus more vulnerable to economic fluctuations.
What are the Pros and Cons of Second Tier Mortgage Lenders?
The most obvious benefit is flexibility. When you reach out to a second-tier mortgage lender it’s not a matter of whether the computer said a yes or no to your application. You’ll have a real conversation with a mortgage officer who will evaluate your application uniquely.
Better still, if you work with a mortgage broker, the broker will help you find an ideal lender and prepare your application. This doesn’t mean that second-tier mortgage lenders don’t have a qualification criteria. They do. It’s only that it may be more flexible than banks, and applications are often evaluated on a case-by-case basis.
Traditionally, borrowers have stayed away from second-tier lenders because of higher interest rates and fees. However, second-tier lenders have become more competitive, offering rates that could rival mainstream lenders. Moreover, their services are more personalized and intimate.
Rescuing Your Mortgage
You may have encountered financial headwinds and perhaps it has spiraled to a mortgagee sale situation. If that’s your position and you are thinking that your credit record is a train-wreck or no licensed lender could rescue your mortgage. It’s time you reach out to a bad-credit mortgage broker to find out more about second-tier mortgage lenders.
They have more flexible terms and could offer you a refinancing deal to give you that much-needed break. Whether you want help for a short term (6-12 months) or a medium-term (3-5 years). You can try a second-tier lender for a mortgage refinancing deal.
It may cost you slightly more interest and fees. But, if it means getting back your home, it may worth every penny.