Risk Appetite - Finding The Right Lender...

Finding the right lender means looking behind the line..

One of the interesting parts of my job as a broker is matching you and your property to the right lender.

As you probably know, the ‘right’ lender is increasingly becoming more and more specific.

Determining to whom or on what type of property a lender will lend on is largely driven by the lenders risk appetite.  Every year, lenders determine their risk tolerance and develop what’s called a risk appetite statement.

This comprehensive statement determines how much money they put into each line of business, each type of mortgage ( insured or conventional ), what lending programs they have and what type of properties they will lend on, along with hundreds of other conditions and restrictions.

This risk appetite statement then becomes the framework for the lenders credit policy, but how does this apply to you?

Typically, once we’ve had our first chat and you send in an application, I’ll complete an analysis to determine which lender best suits your needs. The analysis looks at lenders risk appetites and matches you to a lender. I’ll do the same thing again when you land on a property that you want to call home.

How important is it for me ( and you ) to understand a lenders risk appetite?

A couple of years ago, I was approached by a couple who had been declined by two banks.

They were both professionals, but were new to Canada. They had made an offer on a property that was on leased land. They had first approached his bank, who would consider leasehold properties but did not have a New to Canada lending program to with.

Subsequently, they approached her bank who had a wonderful New to Canada lending program but would not lend on leased land.

Fortunately, there was a solution for them at another lender – I knew which one because I took some time to review another lenders risk appetite.

If you are interested in learning more about risk appetite, give me a call anytime.