Investors ask: Using smaller lenders

The bigger lenders have what they call delegated underwriting authority (DUA). This means the lender can make decisions on behalf of the mortgage insurance company, all the way up to 90 per cent. If you want to borrow more than 90 per cent, they will email it to the insurer for approval. But that only applies to the bigger banks; the smaller banks don’t have anything like that, and they will have to go to the mortgage insurance company.

These days, the mortgage insurance companies are tightening up on approvals. So what I’m saying is that a first time investor, who probably doesn’t have a lot of assets behind them or a strong profile, will have a better chance if the mortgage stays within the bank than going to a mortgage insurance company.

The vital clue is that you’ve only got $55,000, so you’ll probably have to borrow more than 80 per cent. And if you’re in mortgage insurance territory, the big banks are better because they’ve got delegated authority from the insurer to make decisions on their behalf, whereas the small players don’t have that luxury.

Philippe Brach, CEO, Multifocus Properties & Finance