MIC’s and alternative lenders should be seen as a short-term solution.
And if there is one main difference between MICs and Banks, it’s the expected life of the mortgage. It’s often been said and widely considered that MICs should be short-term solutions for acute cash problems. Also, that they should not be considered for long-term debt and the enabling of chronic financial problems.
Typically, your MIC and alternative lenders expect to be paid out within a year or two.
And since they shouldn’t be considered for long-term debt, this is why they always want to know the borrower’s exit strategy. While a bank would never ask about the borrower’s exit plan, an MIC will ask this question every time. And why is this?
Simply put, it’s because people should be using MIC money to solve a problem. Then once they’re back on track, moving back to traditional financing.
It’s also important to note that the money from MIC’s is more expensive. Borrowers should be with an MIC for as little time as possible to minimize the costs. In a sense, the money borrowed from MIC’s should be seen as a bridge to help people over a hurdle. And also, to allow them time to sort out their matters and get back to a bank.
MIC’s are here to help people financially when that help isn’t available from a bank. So, when your MIC lender insists on knowing what the exit is, show the lender how this MIC financing will get the borrower back on track. While your MIC’s and alternative lenders have more lending options available than the banks, they aren’t designed to be utilized long term. As a broker, the best thing for your clients is to ensure they’re informed about the best way to work with an MIC or alternative lender and that it should be considered a short-term solution. And as always, if you have any questions, be sure to contact the lending experts at Kokanee Mortgage.