How Much More Will an Alternative Mortgage Cost Me?
Alternative mortgages usually cost more than traditional bank financing. The difference depends on the lender, the property, the borrower profile and the overall structure of the mortgage.
← Back to the Alternative Mortgage SeriesThe Cost Depends on More Than Just the Interest Rate.
When comparing an alternative mortgage to a bank mortgage, look at the full financing cost — rate, lender fees, broker fees, legal costs, appraisal and how long you expect to keep the mortgage.
Interest Rate
Alternative lenders generally charge higher rates because they are taking on files that fall outside traditional bank guidelines.
Lender Fees
Some alternative lenders charge a lender fee based on the mortgage amount, the risk profile and the complexity of the file.
Broker Fees
Certain alternative and private mortgage transactions may include a broker fee that would not normally apply to standard bank financing.
Legal Costs
Alternative mortgages often require independent legal representation, and legal fees should be included when calculating the total cost.
Appraisal Cost
An appraisal is commonly required so the lender can confirm the property's value and the amount of equity supporting the mortgage.
Length of Time
The longer you remain in higher-cost financing, the more the rate difference matters. A shorter, well-planned term can materially reduce the total cost.
The Cheapest Rate Is Not Always the Cheapest Solution.
A lower rate can look attractive, but the real comparison is the total financial result. If an alternative mortgage restructures expensive debt, prevents a forced sale or creates time to repair the file, the added cost may be justified.
The key is to understand exactly what the mortgage will cost, what problem it solves and how quickly you can move to lower-cost financing afterward.
Look beyond the rate and include every fee and third-party cost.
The mortgage should solve a specific financial problem.
Avoid staying in higher-cost financing longer than necessary.
Know what needs to happen before moving back to conventional lending.
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