When you’re buying your first house, the path before you can feel daunting.
This is due to the fact that in the realm of mortgages, there is a seemingly endless encyclopedia of terminology that those looking to get one have to educate themselves on.
From sub-prime loans to amortization periods, it can be a challenge to keep up with all the new information you’re processing. At CCF, we understand this and act as a guide for our clients who are seeking out mortgage approval. We strive to help them achieve this, and through our blog, we aim to dissect the many aspects surrounding the anatomy of a mortgage.
Therefore, in this post, we delve deep into the difference between balance sheet and non-balance sheet lenders. Here’s everything you need to know:
Balance Sheet Lenders
Also known as chartered banks, a balance sheet lender views your mortgage as an asset – otherwise known as an opportunity for them to profit. These lenders keep your loan on their books as opposed to selling it to another financial institution. This is an attractive option if you’d prefer to deal with the same lender throughout the entire process of paying off your mortgage.
However, when you borrow from a balance sheet lender, your mortgage only becomes more valuable to them if they broaden the difference between their costs and your interest rate.
For example, if down the road you decided to switch from paying a variable rate to paying a fixed one, the lender may begin to charge you higher rates – as they recognize that you will likely stick with them to avoid paying any penalties for breaking your variable rate mortgage and also the hassle of having to find another lender who offers a mildly decreased rate.
Non-Balance Sheet Lenders
A non-balance sheet lender provides mortgages that sell the end product of your mortgage to mutual funds and pension plans. The government of Canada guarantees all non-balance sheet lender mortgages. This means that these lenders can only charge one interest rate and are not permitted to hike it up. In this case, brokers receive a retention bonus for servicing you throughout your entire mortgage payment process.
How CCF Mortgage can help
For our team at CCF, having the opportunity to assist our clients in the process of securing a mortgage to purchase their dream home brings us immense satisfaction. If you’re looking to apply for a mortgage, you don’t need to navigate the process alone. Allow us to help you make your home buying ambitions a reality and
contact us today for a consultation!