What is a 'Level 2' mortgage agent?
March 19, 2024 | Posted by: Chad & Patty Southwell
Long story short a Level 2 mortgage agent has taken additional education and is licensed to deal and trade in mortgages provided by lenders other than financial institutions. Private lenders include:
- mortgage investment companies (MICs)
- syndicates
- private individuals
- agents, brokers, and brokerages
These mortgages are not just for credit issues, unmortgageable properties, hardship and those with unqualified income. Many clients who are otherwise well qualified will opt for a private lender. There are fees involved and that is detailed and fully transparent. These mortgages are usually not amortized and have higher rates but lower (or no) monthly payments. They are generally open and can be paid without penalty or with minimal fees at any time. On the short term they tend to be more cost effective. Here are some circumstances where the best case scenario client may take a private mortgage:
1. Construction financing. While there are banks who offer this product, it tends to require a lot of paper work and is generally a long drawn out process. Private construction financing is easier to obtain and less hassle. The cost of the monthly payments can be deferred until completion to assist with cash flow.
2. Accessing equity. As in the case above, if a well qualified client needs to access their equity for project costs or deposits in the purchase of a new build but does not plan to sell for a year or more, it doesn't make sense to break the current mortgage for a refinance. Instead a second mortgage is placed behind the bank mortgage as a way to tap into those funds without costly penalties. When the time comes to sell, both mortgages are dissolved.
3. Paying back taxes to qualify for a bank loan. Major banks will not use equity to pay off overdue income or property tax. They also will not secure a mortgage with that situation unsettled. A well qualified client can use a private mortgage to clear up that debt and then apply to a bank.
In all circumstances, a private mortgage is a short term solution which always includes an exit strategy to a brighter future. Education, planning and strategizing are a big part of the level 2 education. Without these lenders a lot of Canadians would be without options. Private lending offers a stopgap that moves them quickly from problem to solution.
