The complete mortgage market in Canada consists of residential, commercial and industrial type secured loans. Residential mortgages take up approximately 75% of this total market share.
The six largest banks (including RBC, TD, CIBC, BNS, BMO and NBC) collectively account for 65% of the residential mortgage market share. The remaining 10% is acquired by non-federal bank lenders such as trust and mortgage loan companies, credit unions, life insurance companies, pension funds, non-depository credit intermediaries and private corporations. This is where Wellington Hathshire’s niche market is positioned.
Over the past decade the volume of private mortgages in Canada has dramatically increased and today they take up approximately a 4.5% share of residential mortgages; representing a staggering $60 billion industry in Canada.
Individuals who seek out a private mortgage generally fall into one of the following categories.
Self employed individuals and business owners are often unable to prove their credit worthiness when applying for a conventional mortgage, especially if the business has been in operations for less than five years. They are frequently required to provide additional information to ensure they are financially sound and often times report little to no operating profit for income tax purposes. As a result, major banks find it difficult to (and are regularly not able to) approve these individuals for credit financing.
New immigrants and foreign workers land in Canada without a sufficient Canadian credit history. According to Immigration Watch Canada, approximately 250,000 new immigrants land each year. As a result these individuals are left to seek a private financing solution until an appropriate credit history can be established with the credit bureaus of Canada including Equifax and TransUnion. This also applies to individuals who don’t actively use credit in Canada.
Household debt in relation to disposable income in Canada has risen substantially over the past several years. Canadian consumers have taken on larger amounts of unsecured debt from credit card companies such as VISA, MasterCard, President’s Choice Financial etc. and end up owing approximately 21.99% in interest annually. It is common practice for these individuals to secure and consolidate this outstanding debt in the form of a private mortgage in order to pay a lower interest rate.
First time homebuyers, including young professionals wanting to enter the housing market, are required to have a minimum down payment of at least 20% in order to avoid paying the added home insurance premium. Often times these buyers are unable to afford the total minimum down payment requirement, given the level of home prices (especially in the GTA) and stagnant increase in Canadian income levels, and as a result seek out a private mortgage to cover any shortfall.
Overall, there is an established niche market for private financing that is not readily provided by banks, trust companies, credit unions or other traditional lenders. This market is collectively referred to as the “alternative mortgage market” and Wellington Hathshire was established as an industry leader to fill this lending gap and create a tax efficient investment that earns stable and consistent returns for its shareholders.