Daniel Vyner (pictured top), principal broker at DV Capital Corp., told Canadian Mortgage Professional that alternative and private mortgage borrowers who purchased or refinanced at the height of the recent boom to access home equity or enter the market were facing “multiple layers of issues” in 2023.
Those include the fact that while those short-term mortgage products are viewed as a temporary stepping stone to graduate to traditional financing, many borrowers are finding that the task of moving away from the space is becoming more difficult due to higher interest rates, according to Vyner.
“Borrowers who have made orderly mortgage payments during their mortgage term have received renewal offers at much higher interest rates,” he said. “In some cases, many are unable to convert their mortgage to a traditional… product as initially planned, fear that they cannot afford the mortgage renewal payments, and are opting to list and sell their property.
“Depending on the property location, there may be a value decline from the purchase price which can result in little to no net equity, especially once factoring in purchase and sale transactional costs.”
An abundance of non-renewals has also been apparent in the present market, he said, describing an environment in which private mortgage investors or mortgage investment entities may feel the loans they funded at market peak are now no longer as secure.