Balance sheet lenders. As brokers, we need more of them—especially on the prime side.
Rates like HSBC’s 5-year 2.59% refinance offer, which is not available in our channel, make that painfully clear. No broker lender can come close to this rate, with one exception: WealthOne Bank of Canada.
WealthOne is new to the broker channel. It was founded by eight successful Canadian entrepreneurs of Chinese descent and it received its bank licence in 2016.
The company deals with only a small number of brokers in Ontario and B.C. at the moment. It’s currently accessible only via Newton (Expert connectivity is expected by September) and via emailed applications.
WealthOne targets strong borrowers only. Its average approved borrower has a 745-750 Beacon score. “We don’t go down the credit curve,” says Paul Akey, WealthOne’s VP, Credit and Risk Management. “…That’s an area that you can get killed in [as a prime lender].”
The company has four niches:
- It lends to 80% LTV with no rate premium (unlike most other broker lenders)
- At 2.65% for AAA customers, its promotional 5-year refi rate is absolutely unmatched in our channel, and within easy buydown of HSBC’s 2.59% (The company says this rate is “not a loss leader.”)
- WealthOne has no buydown limits and uses a favourable 4:1 buydown ratio (versus most lenders, that range from 4.2:1 to 4.5:1)
- It uses the contract rate for qualifying 5-year terms
- WealthOne does rentals to 75% LTV at a 10-25 bps rate premium
- It allows rentals in a holding company (with a personal guarantee)
- Investors can own 10 rental units maximum (no more than four can be with WealthOne)
- It has a 50% addback policy for rental income from the subject property and uses the Statement of Rental Activities (net of interest, heat and the mortgage payment) for non-subject property rental income
- All income is fully verified but WealthOne will use up to 50% of a BFS’s applicant business income to supplement their personal income (the amount that can be used depends on how much of the business the applicant owns)
- The business must be in operation for at least two years
- Personal residences of BFS clients can also be in a holding company
- Urban Properties
- WealthOne does condos as small as 375 square feet and homes over $1 million with no rate premiums.
Here are some of WealthOne’s key mortgage features:
- Rate Guarantee: 90 days
- Optional Prepayments: 20% lump sum and 20% payment increase annually
- New Funds: Fixed-rate borrowers who are porting may add funds by extending their term and blending the rate. An admin charge applies.
- Portability Gap: Up to 90 days
- Free Switches: Not available
- Registration: Collateral charge
- Penalty: The greater of three months’ interest or interest rate differential (calculated in a similar fashion as the major banks, except that WealthOne’s posted rates are more favourable)
- Maximum Amortization: Up to 30 years conventionally, typically with a 10-25 bps surcharge if the customer requires a 30-year amortization to qualify
WealthOne doesn’t securitize its conventional mortgages, so they’re all uninsured. The company funds itself with deposits, mainly GICs—sourced both directly and via deposit brokers (which tend to be expensive for “A” lending). It routinely uses short-term deposits to fund some if its longer terms, relying on things like swaps for hedging.
Of particular interest is its high-interest savings account, which links to any other bank. It pays 2.50%—the best non-teaser rate we’re aware of in Canada. You can even use it to automate a savings program, says WealthOne Chief Marketing Officer, Leanna Falkiner
“We don’t believe in gimmicks,” Falkiner says. “This is a rate for every day. We have no monthly fees or service charges. There’s no minimum balance required…[People] have access to their funds 24 hours a day, seven days a week.”
The company says it launched with market-leading rates to “make a name for itself,” not unlike what EQ Bank did last year. But the more a bank pays, the less it makes. WealthOne says it makes up for lower margins on residential mortgages with higher margins in other products. But with such tight spreads, we’re prone to wonder how sustainable rates like 2.65% can be (on a 5-year fixed).
WealthOne aims for one business day turnarounds on files. Given that it manually underwrites every deal and has exceptional rates and products, maintaining that service could be its second biggest challenge…after finding a way to fund industry-leading mortgage rates with high deposit rates, a seemingly impossible feat.