Lenders love to say how flexible they are, how they get deals done, but put a self-employed client, an investor with multiple properties, or a borrower with a work trajectory that isn’t aligned with their pre-fab checklist, suddenly they’re um-ing and ah-ing and the enthusiasm deflates like a month-old balloon. That’s not to say they are inflexible, it’s just what happens with federally-regulated institutions with template approvals that are pretty narrow in scope.
But what if a lender was built around the idea that the rulebook is counter-intuitive to success? What if the deal is the most important thing, however it gets done, and customized to the borrower and their particular way of doing business?
Glasslake’s unnecessary box-ticking philosophy shows up in three specific ways: how we qualify our borrowers, how we structure the terms of the deal, and how far we can stretch the amortization period for maximum flexibility.
No Stress Test Standing Between Your Client and Their Deal
If you’ve ever pitched your loan at a big bank or lender, you’ve experienced the so-called stress test. The Office of the Superintendent of Financial Institutions, aka OSFI’s, B-20 guideline, federally-regulated lenders must qualify their borrowers’ contract rate plus two percentage points (or a floor rate set by the regulator), rather than the rate they will actually pay – whichever is higher. The Globe and Mail has an article where they talk about how it is designed to make sure borrowers can still make payments if rates climb or income drops, and it applies to every bank, federal trust company, and federal credit union in Canada. Glasslake doesn’t fall under OSFI’s B-20 Guidelines, so we have a lot of flexibility that other lenders may not have.
This setup makes sense, in theory. In practice it can cut your buying power. Like, a lot. Ratehub’s breakdown of the stress test shows just how much in the example of a borrower who was approved for a rate in the low 4% range, and how they might get qualified as if they were paying well over 6% instead. If you’re self-employed and your income is a bit all over, or if you’re an investor with debt service ratios across multiple properties, this gap can be the deciding factor between acceptance and rejection.
But Glasslake isn’t a federally regulated lender, which means that B-20’s qualifying breakdown doesn’t play any role in the way we structure deals. We don’t disqualify a good borrower because of some arbitrary stress test built for a completely different institution.
We consider the deal on the desk, look over the property, the income as is, the exit strategy, legitimate equity, and then underwrite the deal on its own merits. That is what alternative lending is to us.
Short and Long Loan Terms, Built Around the Deal, Not the Institution
Of course big banks and lenders default to a set list of standard terms. They deal in high volume. They have no choice but to streamline their process so that people at the branch level don’t end up approving liabilities because the complexity is too confusing to know a good deal from a bad deal. That works for millions of accounts, like a homeowner refinancing another five-year fixed rate, but sucks if you’re a self-employed borrower who wants a shorter term now with the plan to move to a lower-cost lender once your most recent tax return lines up with your actual income.
Not everyone’s in the same boat, and alternative lending exists because there are so many special situations that they are no longer considered rare from a business standpoint. Somebody needs to fill in the gaps. Forbes has an overview of private and alternative lenders which covers how these lenders set their own terms rather than following a single rigid template, which is exactly why they can be evaluated one by one, and instead forced through a cookie cutter approval process.
Length of the loan should be treated like a tool, not a default setting on a toaster. Short terms buy clients time to resolve outstanding credit issues, beef up income, or slide into a more permanent financing arrangement once a property’s earnings and expenses line up. Think about all the people who get hit with interest hikes at the same time because of all the fixed rates, when a longer term can give you peace of mind for a longer time period. But custom time frames that adapt to your unique financial situation are simply not available to you when dealing with quick and easy one-stop-shop loans and lenders. If you’re a broker, that means you’re closing more deals and making less excuses that hurt your reputation, not the lenders.
Longer Amortization That Actually Pays a Loan Down
Amortization is where push comes to shove when it comes to how much pressure a borrower feels on a given day and for how long. Insured mortgages (the ones with less than 20% down) are limited to a maximum amortization set by federal insurance rules. The uninsured loans are also limited because of guidelines which bind big banks. Nesto’s research on amortization extensions writes about how prime lenders normally don’t go past thirty years, while alternative lenders, working with at least twenty percent down or built-up equity, can go way beyond.
The payment impact of that difference can be huge. WOWA’s analysis of forty-year mortgages shows how a longer amortization can actually lower a monthly payment compared to the standard twenty-five or thirty-year road map. This is a big deal for a self-employed borrower managing variable cash flow or an investor trying to keep a rental property’s numbers functioning in a tighter rate environment.
Longer amortization at a boutique lender like Glasslake is the single most effective lever you can have in making a deal affordable without changing the purchase price or down payment. Longer amortization is not about carrying debt longer than need be, but giving brokers a real option to say yes when the only thing in between a deal and no deal is the monthly payment. We’re all adults here, and most people know how to manage their money. It’s about respect and flexibility, at the end of the day.
When you combine this with flexible terms and underwriting that isn’t tied to a generalized stress test, amortization options help close the deal.
The Deal Comes First
This isn’t about any one of these three advantages in a vacuum, which is the point. A client that doesn’t pass the big bank stress test, who needs a term structured around a specific exit plan, and who benefits from longer amortization to make the payment work is not a fringe case for us. That’s a Tuesday. Big banks are not designed for custom loans. And they aren’t wrong to run a tight and standard process, because it’s what regulation forces them into.
That means a ton of deals that could and should be made fall through the cracks, and somebody needs to be there to keep options on the table for regular, hard working, and creative people.
TL;DR: Emily’s One-Minute Version
- No stress test: OSFI’s B-20 qualifying-rate rules limit big banks from taking good on the actual numbers instead of an inflated qualifying rate that shrinks buying power.
- Flexible loan terms: Short or long terms are chosen to fit the deal (bridge financing, seasoning income, locking in certainty) rather than defaulting to whatever’s easiest.
- Longer amortization: Amortization beyond what most banks offer lowers monthly payments and gives self-employed borrowers and investors more breathing room without affecting the price or the down payment.
