When you start your home buying journey, the last thing you want is to be denied on your mortgage application. For many Canadians with low credit scores or non-traditional employment histories, not being approved for a mortgage is a fear that often becomes a reality.
Even Canadians that seem like good candidates for mortgage approval on paper can sometimes be denied. Luckily, there are solutions for Canadians who are unable to get a traditional mortgage. Subprime mortgage lenders, also known as B lenders, are helping many Canadians with unique financial situations become homeowners.
Realty Financial Advisors (RFA) Bank of Canada is a B lender that has recently expanded into the mortgage field. As a newer mortgage lender, they are working hard to attract new clients by offering convenient and affordable mortgage solutions. Are they worth your time and trust? Let's find out.
What is a B Lender?
B lenders are mortgage providers that offer flexible solutions for clients with low credit scores. They differ from traditional mortgage lenders, like the Big Six banks, by having less stringent application requirements and higher interest rates.
B lenders are not considered as banks but rather private financial institutions. This designation means they are not regulated by the Office of the Superintendent of Financial Institutions (OFSI).
OFSI regulates banks and A lenders, ensuring they adhere to specific regulations including the Canadian mortgage stress test. The result is stricter requirements for mortgage approval.
Good for the self-employed and those with fluctuating incomes
Because OFSI doesn’t regulate B lenders, they have more flexibility in their requirements for applicants. This flexibility means they can approve mortgages for people with low credit scores or less stable financial histories. B lenders are also great for those with a seasonal, commission-based, self-employed, or fluctuating income.
Since B lenders work primarily with clients whose credit scores indicate that they may be more likely to default on their loan, they typically charge higher interest rates to compensate for any losses they may incur.
Higher interest rates are one major downside to B lenders, since it results in a much higher overall mortgage. Mortgage calculators can help you estimate your mortgage payments and allow you to quickly see how much will be added to your loan, depending on your interest rate. If you want to compare your mortgage options, mortgage comparison tools can give you side-by-side comparisons between lenders and help you determine which lender may be right for you.
Who is RFA?
RFA, which stands for Realty Financial Advisors, is a real estate investment firm founded in Canada in 1996. RFA focuses on more than just mortgages. The firm also works with debt financing transactions, REITs, retirement homes, and investment properties. RFA has over $90 billion in assets.
RFA expanded into the residential mortgage sector in 2018 by acquiring Street Capital Bank. Before the merge, Street Capital Bank was the sixth biggest broker lender in Canada by market share. RFA is poised to develop some great mortgage solutions for Canadians.
RFA has both A and B lender departments. Similar to banks, RFA Mortgage Corporation focuses on A lender business for clients with competitive credit score. RFA Bank of Canada specializes in alternative and B lender mortgages. Mortgage brokers can view all RFA mortgage products on one site.
Applying for an RFA mortgage
Applying for a mortgage with RFA is easy, especially if you already have a mortgage broker. Your broker can set you up with RFA’s products, or you can contact RFA’s customer service to speak with a representative.
A mortgage calculator or comparison tool can help you feel confident about your mortgage plan before speaking with an advisor. RFA also has links to some of the required mortgage application forms. The following information is typically collected during the mortgage application process:
- Your address
- Employment details like your current job, income, employment history
- Financial details like assets and liabilities
RFA mortgage pre-approval
Like many B lenders, RFA does not have a pre-approval option. Since they work with clients with more complex financial needs, RFA is unable to provide mortgage guarantees without more in-depth information.
There is an alertnative. Using a mortgage qualifier calculator helps you understand how much you can potentially borrow.
Pre-approvals are a huge benefit during the home buying process by helping you understand your budget and letting sellers and realtors know you are serious about buying a home. Some banks even offer rate holds, so if the prime rate rises after you have been pre-approved, you will still get the lower interest rate.
If not getting a pre-approval is a deal breaker, a mortgage through a bigger bank may be a better option for you. Mortgage comparison tools can help you find lenders with similar rates and terms that still offer pre-approval.
RFA mortgage options
RFA’s mortgage products aren’t as diverse as the banks or other mortgage lenders like nesto, but they have some great short-term mortgage options. RFA’s mortgages come in terms of 1 to 5 years, in variable and fixed rates.
While some lenders offer home equity lines of credit (HELOC) or combined mortgages and HELOCs, RFA has a more limited offering. RFA’s mortgage products include:
Fixed Rate Mortgages
- Fixed rates mean your mortgage payments will be the same month to month
- You will have the security of a fixed payment but won’t be able to take advantage of any dips in the prime rate.
Variable Rate Mortgages
- Variable rates mean that your mortgage payment could change month to month.
- Your interest rate fluctuates with the Prime Rate.
- When the Prime Rate rises, you will pay more on your monthly payment.
- If the Prime Rate falls, you will save money on your monthly payment.
- Depending on the Prime Rate, you could save money over the long term or end up paying more for your mortgage.
All of RFA’s mortgage products allow you to make changes to your terms, giving you lots of flexibility. Some lenders charge a fee for things like changing a payment date or making prepayments, so RFA’s offerings are very convenient. Through RFA’s online portal, you can:
- Change your payment date
- Change your payment frequency (monthly, semi-monthly, bi-weekly, weekly)
- Make additional payments of up to 20% of your mortgage annually
- Increase your payments to up to 20% of the principal and interest payments annually
Shorter mortgage terms of 1 to 5 years give you a lot of flexibility. After your term finishes, you can re-evaluate your options and switch mortgage plans, switch providers, make a larger payment on your mortgage, or pay off your mortgage entirely.
Shorter terms are especially beneficial if you plan on selling your home soon. Remember that B lenders typically charge higher interest rates, so be sure to compare your options before choosing your mortgage lender.
RFA mortgage incentives and special offers
Unfortunately, RFA doesn’t have very many unique offerings or incentives that set them apart from the crowd. Some lenders offer cash-back mortgages, sweepstakes, home repair coverage, skip a payment programs, and other innovative offerings.
That said, RFA has a property tax program that may help you check one more task off your to-do list. The property tax program offers the ability to combine your property taxes with your RFA mortgage.
Instead of paying your property tax in one lump payment annually, you can pay off the tax a little bit each month and let RFA take care of the heavy lifting. RFA will ensure your taxes are paid on time at no extra cost.
RFA mortgage interest rates
When comparing RFA’s prime rate to other banks’ posted rates, RFA’s rates appear to be significantly lower. Don’t let their posted rates trick you though.
Most applicants will not have a credit score high enough to qualify for the lowest posted rates. You must have a very high credit score and significant, reliable income to get the best rates.
Interest rates for B lenders are typically higher because of the level of risk associated with working with clients with low credit scores. Bypassing some of the standard regulations in place for A lenders means lenders can’t always be sure that clients will be able to pay back their mortgage.
Therefore B lenders ask for higher interest rates. That said, interest rates for B lenders have slowly been getting more competitive as they become more popular with Canadians.
Negotiating rates is very common in the mortgage industry. If you aren’t happy with your quote, try shopping around at different financial institutions, and don’t be afraid to let a lender know if you have found a lower rate elsewhere.
Some online comments about RFA suggest that they take longer than usual to update their rates when the Prime Rate falls. This delay can frustrate those with a variable rate mortgage who are vulnerable to rate changes.
Rate-changing delays might cause you to unnecessarily spend more on your mortgage. Therefore, be sure to discuss this issue with a broker and always read through your mortgage contract carefully.
RFA mortgage for new Canadian residents
Embarking on your home buying journey as a newcomer to Canada can be challenging. Many banks require extensive Canadian employment history and good credit history in Canada.
Many newcomers haven’t had the time yet to build their Canadian credit and work history. The time to build a credit history can be frustrating, especially when you know you are ready to stop renting and buy a home.
While RFA doesn’t have any designated programs for Canadian immigrants, their focus on helping clients in unique financial situations means that RFA could be able to help with your mortgage needs. Reach out to a mortgage broker or RFA associate to learn your options.
Read more about finances for Canadian immigrants
RFA mortgage pros and cons
- Works with mortgage brokers
- Application is less strict compared to big banks
- Caters to clients with unique financial situations, and low credit scores
- Online portal
- Higher rates
- Possible delays in adjusting variable rates
- No pre-approval options
- Limited product offerings
Since subprime mortgages have become more prevalent in Canada, it is essential to understand each lender and what they can offer you. RFA is an excellent option for those looking for shorter mortgage terms and the ability to refinance their mortgage every few years.
RFA has great prepayment options and a convenient online portal that makes checking in on your mortgage easy. Comparing RFA and other B lenders to the big banks is important, as B lenders often charge higher interest rates. For Canadians with low credit scores, RFA and other B lenders are crucial in ensuring you can buy a home no matter your financial situation.
Frequently asked questions about RFA mortgages
RFA is a B lender with an A lender division. Having both an A and B division means that while RFA typically focuses on clients with unique financial histories, they also approve mortgages for those who have the option of getting approved by bigger lenders. Their A and B divisions are closely tied, so mortgage brokers can use one convenient portal to get information from both departments.
RFA’s posted mortgage rates are similar to the big banks but remember that posted rates will not always be the rate offered by your lender. RFA, along with most B lenders, typically charge higher rates because many of their clients have lower credit scores or less steady sources of income. If you have a great credit score, you may be eligible for competitive rates from RFA that rival the Big Six.
RFA makes it easy to contact their customer service department. You can call RFA at 1-877-416-7873 or send them an email at email@example.com. RFA’s customer service is relatively quick to respond to inquiries and will be happy to help answer any questions you may have.
Most of RFA’s services take place online or through mortgage brokers, but they have two central office locations in Ontario. RFA’s head office is in Toronto at 16 York St, Suite 1900. They also have an office in Waterloo at 451 Phillip St, Suite 100.