How Much Higher Are Alternative Mortgage Rates?
Alternative mortgage rates are higher than traditional bank mortgage rates. But the rate difference by itself doesn't tell you whether an alternative mortgage makes sense.
The more useful question is: what does the higher rate actually cost you, and what problem does the mortgage solve?
Higher — but there isn't one standard “alternative mortgage rate.”
Your actual rate depends on the lender, your credit, income, property, loan-to-value and the reason you don't fit traditional lending guidelines.
Two borrowers looking for the same mortgage amount can receive very different alternative lending terms.
Alternative Lenders Are Pricing a Different Risk.
Alternative lenders are often approving mortgages that traditional lenders either cannot or will not approve under their standard guidelines.
Credit Issues
Lower credit scores, recent missed payments, collections or a recent credit event can increase lender risk.
Income Doesn't Fit the Bank Box
Self-employed income, commission income or other non-traditional income may require a more flexible underwriting approach.
Higher Overall Risk
Higher debt levels, mortgage arrears, property issues or unusual circumstances can all affect pricing.
There Is No Single Alternative Mortgage Rate.
Compare Dollars — Not Just Percentages.
A mortgage rate is only one part of the calculation. The amount borrowed, term length, fees and what the mortgage allows you to eliminate all matter.
“This mortgage is more expensive.”
That's true if you're comparing two otherwise identical mortgages and you qualify for both.
But that's often not the situation when someone needs an alternative lender.
“What does this mortgage actually accomplish?”
If the mortgage reduces high-interest debt, solves arrears, prevents a forced sale or creates a path back to a bank, the higher mortgage rate may be only one piece of the financial outcome.
Look at the Monthly and Total Dollar Difference.
The percentage difference can sound dramatic. The actual dollar difference tells you whether the strategy makes sense.
The Goal Usually Isn't to Stay With an Alternative Lender Forever.
A properly structured alternative mortgage should normally have a reason and a plan behind it.
Maybe credit needs time to recover. Maybe income needs another year of history. Maybe debt needs to be cleaned up. The mortgage should buy enough time to solve the problem that prevented traditional financing in the first place.
Yes, Alternative Rates Are Higher. The Question Is Whether the Strategy Is Worth It.
If you qualify for a traditional mortgage, that's usually where you should be. Alternative lending becomes relevant when you don't — and the financing solves a problem that is more important than simply obtaining the lowest possible rate today.
Start With Your Situation. Then Compare the Numbers.
Tell me what's going on, and I'll help you understand which lenders may realistically consider the mortgage and what the financing is likely to look like.
Let's Talk →