As a result, the Canadian banking industry is making advancements in their regulations to ensure that all parties involved in the loan process are protected. Scotiabank is no different, having implemented a number of new measures in order to ensure that their blended mortgages remain secure and appropriate for the borrower.
Blended mortgages are loans that combine funds from multiple sources, such as private money, private debt, or government-backed securities. They are a convenient way for banks to provide individuals with access to credit when traditional means are not available. For example, homebuyers that may not qualify for a traditional loan due to low credit scores may be eligible for a blended mortgage. However, in order for these loans to remain safe and secure for both parties, banks must stand by their risk assessment measures.
Scotiabank has recently implemented a handful of steps that they hope will ensure that the borrowers who take out blended mortgages through their institution are financially stable and capable of repaying the loan. These steps include the establishment of a minimum credit score requirement, a loan-to-value (LTV) ratio that doesn't exceed 80%, and a debt-service-ratio (DSR) that is below 40%. Furthermore, if borrowers cannot meet any of these standards, Scotiabank reserves the right to refuse them a loan.
In addition to these new regulations, Scotiabank is also introducing the ability to pre-qualify customers via their online portal, allowing them to quickly determine if their financials are suitable for a loan. Customers will also be able to access a range of tools to help them better understand the loan process and make more informed decisions regarding their loan preferences.
Overall, blended mortgages are becoming increasingly popular in the Canadian banking industry, and institutions like Scotiabank are taking all the necessary precautions to ensure that these loans are provided responsibly. Banks are now requiring borrowers to meet certain credit and debt requirements before they’re eligible for a loan, and offering helpful online resources for potential customers to gain a better understanding of the loan process.
This article was contributed on Oct 22, 2023