When buying a home, most Canadians apply for a mortgage with one of Canada's largest "Big Six" banks, such as BMO or TD. However, poor credit scores and low income can affect one's chances of getting a mortgage, as banks believe that these factors put their assets at risk.
According to the Canadian government, nearly all Canadian homeowners will have a mortgage during their lives. Furthermore, the median mortgage is $200,000, meaning the average home costs even more. Thus, buying a home without help from a mortgage is difficult for the average Canadian.
Today, we present this in-depth MCAP mortgage review as an alternative to getting a mortgage with a traditional bank. MCAP bridges the gap for Canadians facing difficulties in getting a mortgage.
What Is MCAP?
MCAP is the biggest independent mortgage provider in Canada, also known as a Mortgage Finance Company. The most notable difference between MCAP and Canada's banks is that MCAP solely provides residential and commercial mortgages to its clients, while banks provide other services such as insurances, bank accounts, credit cards and other loan products.
As a B lender, MCAP is a private financial institution that provides mortgages to Canadians who may not qualify for a loan from a larger bank. It has operated for over three decades and manages over 225,000 mortgage accounts.
A Lenders vs. B Lenders
Banks and mortgage providers fall under either the A or B category. A lenders consist of banks and credit unions, which tend to take on low-risk clients with good credit scores and/or sufficient income.
B lenders, or subprime mortgage lenders, work with clients who have unstable employment or low credit scores. These financial institutions do not follow the same regulations and laws as A lenders due to their privatization.
B lenders are a great way for anyone with an alternative employment situation or other perceived financial instability to acquire a mortgage. Self-employed workers, for example, often have difficulty proving their financial stability to an A lender. Choosing to work with a B Lender instead can provide these clients with the opportunity to own a home.
We would primarily classify MCAP as a B lender, though they do offer an A lender division to clients who are more financially stable.
MCAP's A Lender Division
MCAP doesn't only operate as a B lender. They also offer A lender services for those who are less financially risky and who have more stable credit scores.
MCAP is becoming extremely popular for Canadian home buyers, including those with excellent credit scores.
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MCAP Mortgages and Interest Rate Options
MCAP offers the following mortgages and services for their clientele:
Fixed Interest Rates
MCAP offers fixed-rate mortgages to qualifying clients. This plan guarantees one interest rate (and therefore fixed monthly payments) on the principal balance and accrued interest every month. MCAP also offers prepayment options so you can pay extra on your principal balance every month, thus paying off the loan faster and lowering the overall accrued interest. We will discuss this later.
MCAP determines your fixed interest rate based on the market at the time that you take out a mortgage with them. The interest rate will never fluctuate throughout the mortgage term.
Variable Interest Rates
MCAP's variable-rate mortgages do not guarantee one single interest rate at the time of application. Rather, they use MCAP's Prime Rate to determine what your interest rate is at the time that you pay your monthly bill.
This option comes with risk, as some months could provide you with a particularly low-interest payment while you may see it rise significantly in other months. With this type of mortgage, the base value of your monthly payment will always stay the same, but the amount that applies to the principal versus interest will fluctuate based on the prime rate at the time you pay.
MCAP's prime rate fluctuates based on the Bank of Canada's interest rate.
Combined Property Tax and Mortgage Payment Plans
Every homeowner must pay property taxes, which is why MCAP offers a free combined payment plan service for its customers. MCAP will crunch the numbers for you and charge you a combined bill for your taxes and mortgage, so you won't need to make both payments separately.
The MCAP Fusion Mortgage plan allows you to combine your mortgage with an equity credit line. As you pay your mortgage, your line of credit will increase to up to 65% of your home's value. This plan allows you to secure your credit against your property, meaning that MCAP permits you to pay it off without penalty whenever you want.
MCAP Safeguard Mortgage
MCAP's Safeguard Mortgage works in much the same way as a second mortgage in that it assists you in bypassing pre-payment fees or refinancing on your existing mortgage. It also allows you to access the equity in your home without impacting your current mortgage payments.
MCAP's Special Offers and Incentives
In order to stay competitive, most big banks need to incentivize their products and services with attractive bonuses, special offers and benefits. As MCAP is a B lender however, they have very little competition and almost no incentives. On the other hand, they do have some programs that are quite attractive.
All MCAP clients have the opportunity to enter a monthly sweepstakes for an opportunity to win anywhere from $500-$5,000. Even better than that is a grand prize of $20,000 of mortgage payments.
MCAP Property Tax Service
As mentioned above, MCAP has a great program where you are able to group your mortgage payments and your property taxes into one. This ensures that your property taxes are paid on time and is a complimentary service for all MCAP clients.
MCAP Home Service Plan
Probably one of the most attractive special offers from MCAP is their home service plan. This plan covers home repair costs up to $10,000 per year. Although the service is dependent on the province you live in, the following are covered:
- Ancillary repairs
- Water heater repairs (if applicable)
- Emergency plumbing
- Central heating and air conditioning
- Electrical systems
MCAP employs their own service technicians in all of those categories. If their technicians are unable to make the repair, MCAP assists to replace it.
Additionally, an added $500 is covered by MCAP if structural damage is caused during repair; ie, breaking through a ceiling, floor or wall.
The MCAP home service plan is free for the first year, and only $17.95 monthly after that. A small price to pay for damages that could cost you thousands of dollars in the long run.
MCAP Mortgages for New Canadian Residents
Currently, MCAP does not have specific programs on their website for new immigrants. However, due to their commitment to providing mortgages to those with less then perfect credit histories, there is likely an option for everyone at MCAP. We recommend speaking to an MCAP broker to understand how their many services can apply to newcomers as well.
How to Apply for MCAP Mortgage?
MCAP requires the following information during the initial application process:
- Expected mortgage amount
- Projected down payment
- Current residence
- Details about employment and income
- Information about financial assets and liabilities
While the list above is accurate, it's wise to have a exact details about the documents you will need to prepare for your mortgage application, as they are many and most definitely require ample time to gather. Learn more about the mortgage document preparation and application process here.
MCAP's Mortgage Prepayment Options
If you want to get ahead on payments and reduce your interest payments, MCAP offers the following options:
- Increase the amount of your monthly payment: MCAP allows you to pay up to 20% extra on your monthly mortgage bill. MCAP directly applies the extra money to your principal balance rather than your interest, which can significantly decrease the amount you pay in the long run.
- Pay more frequently: Though most homeowners pay on their mortgage monthly, you can opt to pay bi-weekly, thus lowering your bill and the overall amount of interest you will pay over time.
- Pay a lump sum: Just like MCAP's option to pay up to 20% extra on your mortgage bill every month, you can also pay a lump sum of up to 20% of your total mortgage per year. If you can afford it, this is one of the best prepayment options because it significantly reduces the principal balance, thus reducing the accrued interest.
Pros and Cons for MCAP Mortgage
MCAP is Canada's largest alternative mortgage provider for a reason. For anyone who has struggled to get a mortgage with Canada's A lenders, MCAP is a fantastic alternative with fair policies. However, there are pros and cons to this company.
- MCAP does not put applicants through as strict of a selection process in comparison to Canada's Big Six banks.
- MCAP has flexible plans for every client and offers additional services that are convenient and beneficial (such as fusion mortgage).
- MCAP partners with mortgage brokers to facilitate the application process.
- For anyone in a complicated financial situation, MCAP can help you afford a mortgage.
- MCAP does not offer pre-approval to new clients.
- Because MCAP is a private organization, its interest rates are higher than some banks.
- Some clients report that MCAP does not have good customer service.
Is MCAP Worth It?
Whether MCAP is worth it to you depends on your finances and budget. You must evaluate both of these before proceeding with a large commitment like a mortgage.
When considering a mortgage, the first and most important step is to plan. Take account of your finances and use a mortgage calculator to determine how much money you will spend over many years with a predetermined interest rate. Do your research to determine if MCAP is the best company for you and the most likely outcome for your situation.
If you find that MCAP aligns with your financial goals and want to own a home but haven't had any luck with Canadian banks, MCAP is a viable solution to your problems.
At Insurdinary, we make comparing mortgages easy. By partnering with Canadian mortgage broker Homewise, we can facilitate the application process and increase your chances of getting a mortgage with MCAP.
Furthermore, if you would like to find out more about the other services we offer here at Insurdinary after reading this MCAP mortgage review, such as assisting our clients in finding private health insurance, you can also contact us by filling out our convenient online quote form today.