When most Canadians think of mortgage providers, the Big Six Canadian banks including BMO, CIBC, and TD come to mind. However, not everyone is able to get a mortgage from a Big Six bank. Often, larger banks require a good credit score and other income requirements in order to accept your mortgage application.
Those with low credit scores or other disadvantages can turn to a subprime mortgage provider. These also known as a B lenders.
One of the biggest names in B lenders in Canada is MCAP. Read on to learn about their offerings and to see if a subprime mortgage lender may be suitable for your situation.
What is a B lender?
B lenders, or subprime mortgage lenders, are mortgage providers who specialize in alternative mortgage solutions for those with non-traditional employment circumstances or low credit scores. As of 2016, 12% of all current mortgages in Canada were through B lenders.
To put it in context, This is a significant increase from 2001 when B lenders only accounted for 2% of outstanding mortgages in Canada.
Getting a mortgage with a traditional bank is difficult for those with low credit scores or non-traditional sources of income. The Big Six have rigorous criteria for mortgages.
Even if you have a competitive credit score and application, you can still have trouble getting approval for one reason or another. B lenders are a reliable mortgage alternative for those with more complicated financial histories, like self-employed or seasonal workers.
While most mortgage lenders in Canada are governed by the Office of the Superintendent of Financial Institutions (OFSI), B lenders are considered private financial institutions. They do not have to follow the same regulations as A lenders.
B lenders are also able to bypass the mortgage stress test, which is often a barrier for Canadians in obtaining a mortgage.
Who is MCAP?
MCAP is an independent Mortgage Finance Company, not a bank. They deal specifically with mortgages, unlike banks which offer various banking services like credit cards and insurance.
MCAP is the largest Mortgage Finance Company in Canada and has been operating for over 35 years. They manage over $150 billion in assets, have assisted over 400,000 Canadian homeowners. MCAP employs over 1500 people in over ten offices across the country.
SMCAP partners with mortgage brokers like nesto to help you through the mortgage process.
Applying for a mortgage
To apply for a mortgage with MCAP, you must first contact a representative from their Mortgage Solutions Centre. From there, the MCAP mortgage expert gathers essential information about your mortgage.
- Your expected downpayment
- The mortgage amount
- Your address
- Employment Details (current job, income, employment history)
- Financial Details (assets, liabilities)
The A team of MCAP
MCAP also has an A lender division. The A lender division provides competitive rates for clients with higher credit scores and less risky financial positions.
MCAP is becoming increasingly popular with Canadians, including those with high credit scores.
Know your budget beforehand
You need to know your budget before speaking with a mortgage expert. Mortgage calculators help give you a better idea of your overall mortgage budget and break down monthly payments based on different interest rates and down payments.
Knowing your budget and potential payments lets you communicate effectively with your MCAP representative. It also ensures that you are looking at homes within your budget when you begin your house hunt.
MCAP also uses mortgage brokers to sell its products. Mortgage brokers earn commission to act as a liaison between mortgage lenders and their clients.
Some mortgage brokers can even “buy down” rates by giving a portion of their commission back to the lender in return for a lower interest rate for their client. That was news to me.
Read more about mortgage brokers
Pre-approval can be a massive help in the home buying process. It helps give you a better understanding of your budget and lets realtors know you are serious about buying a home.
Unfortunately, because of MCAP’s unique B lender offerings, they are unable to provide pre-approvals. Mortgage qualifier calculator can help fill this gap by providing an estimated overview of your budget.
Switching to MCAP Mortgage
Like the Big Six banks, MCAP offers plans for those looking to switch their mortgage provider. MCAP recommends researching your options before the end of your term This way have a plan in place when it is time to renew and you avoid any fees from your current mortgage provider.
Once you know what type of mortgage you want, contact a mortgage broker to help you with the next steps. From there, you will just need to gather some documents, wait for approval, and notify your current lender of the switch.
MCAP mortgage options
MCAP offers mortgage products that are very similar to the Big Six banks. Although their products are similar, MCAP’s interest rates, like most B lenders, can be higher than traditional banks.
MCAP offers the following mortgage products:
- Fixed rate mortgages
- Stability of fixed interest rates, meaning your mortgage payment will be the same each month whether or not the Prime Rate rises or falls.
- Flexible payment options like lump sum pre-payment or payment increases can help you become mortgage free faster.
- Variable rate mortgages
- Interest rates fluctuate with the Prime Rate, meaning you could have a higher or lower mortgage payment from month to month.
- You can convert to a fixed rate with no extra fees.
- Flexible payment options like lump sum pre-payment or payment increases can help you become mortgage free faster.
- Fusion mortgage
- A product that combines the benefits of a traditional mortgage and a line of credit.
- Available funds on the line of credit increase as you pay off your mortgage.
- Access up to 65% of your home’s value on the line of credit.
- Pay off the line of credit portion at any time with no penalty.
- MCAP Safeguard mortgage
- Acts as a second mortgage to help you bypass refinancing or pre-payment fees on your current mortgage.
- Access the equity in your home without disrupting your current mortgage.
Try out our mortgage comparison tool if you’d like to see side-by-side comparisons of MCAP and other lenders.
Incentives and special offers
Many big banks offer promotions to set themselves apart from the competition. Since MCAP is a B lender, they have fewer competitors and, therefore, fewer special incentives and promotions. However, they do have a couple of programs to entice you.
MCAP Home Service Plan
The MCAP Home Service Plan is a program that covers costs of home repairs, up to $10,000 a year. Depending on your province, it covers the following:
- Central heating and air conditioning
- Electrical systems
- Water heater (if owned)
- Emergency plumbing
- Ancillary repairs
MCAP has its own service technicians that can come to your home and assess your needs. If their service technicians can’t repair the unit, MCAP will help you replace it.
They will also cover repairs of up to $500 if the service provider has to break through walls, floors, or ceilings to access your unit. The first year of the Home Service Plan is free.
After the first year, the plan is $17.69 monthly and billed along with your MCAP mortgage payment. You could be in for significant savings if you end up needing a repair, so it is worth considering.
MCAP Property Tax Service
MCAP also has a program that allows you to combine your property tax payments with your MCAP mortgage. The Property Tax Service enables you to pay MCAP monthly installments for your taxes along with your regular mortgage payment. MCAP pays your property taxes on time, leaving you one less task to worry about. This service is free for all current mortgage customers.
MCAP’s last exciting promotion is the MyHome Sweepstakes. As an MCAP mortgage customer, you can enter into their monthly sweepstakes for the chance to win gift cards ranging from $500 to $5,000. Their biggest prize is $20,000 worth of mortgage payments.
MCAP’s Interest Rates
Because MCAP often takes on clients that may pose a higher risk of defaulting on their mortgage, they typically charge higher interest rates to account for any losses they may incur.
However, interest rates from many B lenders are falling. Their rates are becoming more competitive, with MCAP’s Prime Rate currently matching the Big Six.
Interest rates vary depending on your credit score and employment circumstances. You become eligible for more competitive rates if you have a high credit score. Unfortunately, lower credit scores often mean a much higher interest rate, especially with B lenders.
New Canadian residents
MCAP does not list any specific programs for Canadian newcomers on their site. Given their commitment to helping clients with non-traditional financial histories secure a mortgage, they may still be able to help. Contact an MCAP mortgage expert or a mortgage broker to discuss your options.
MCAP mortgages pros and cons
- Works with mortgage brokers
- Less strict application requirements
- Flexible offerings
- Higher rates
- Negative customer service reviews
- No pre-approval options
It is easy to see why subprime mortgages are popular in Canada. With more and more Canadians needing to rely on credit cards to pay for basic essentials, many are finding themselves in challenging financial positions with less-than-ideal credit scores.
B lenders like MCAP help make home ownership a reality for many Canadians by offering flexible mortgage application requirements and bypassing the mortgage stress test. The downside to MCAP and other subprime lenders is that they may have higher interest rates than the Big Six.
Frequently asked question about MCAP
The names subprime or B lender may make you feel apprehensive about signing on to a mortgage with MCAP, but having a mortgage from an independent lender still offers safety and security. B lenders are a viable option for many Canadians, no matter your credit score.
Insureye.com reviews for MCAP are not all positive. Some reviewers reported poor customer service and confusion about the fine print of their mortgage contracts. Choosing a mortgage lender is a personal decision based on many different factors unique to each homeowner. Try comparing MCAP to other lenders using a mortgage comparison tool to see if they might be the right fit for you.
You may think MCAP is an acronym, but it’s actually just a snappy name. The business adopted the name MCAP in 2000 after merging several companies, but MCAP doesn’t stand for anything specific.
MCAP is an independent financing company which means they are not associated with a major bank. They have merged with many different mortgage and financial groups over the years, helping them establish a presence all over Canada. The President and CEO of MCAP is Mark Aldridge, who joined the company in 2001.
MCAP is focused on helping clients with non-traditional employment histories, such as variable, seasonal, or self-employment incomes, and Canadians with low credit scores. Although that is their primary focus, MCAP has both A and B lender divisions, meaning they can assist you with your mortgage needs no matter your credit score.
Find the best mortgage for your needs
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