Private Mortgage

In recent years increasing property prices and changes in legislation has made it increasingly difficult to qualify for a mortgage through a traditional bank. The application process is slow and time-consuming due to the stringent rules and legislative requirements.

It is because of this that many investors are turning to Private Mortgage Lenders in Mississauga and other parts of Canada. Unconstrained by bureaucracy private lenders move quickly and the application process is simple.

Private property investors, the self-employed and people with poor credit ratings have all found that Private Mortgage Lenders will very often help when the banks have been reluctant to offer them money or are simply too slow for investors seeking to make money from valuable opportunities.

Investors use private funding for “fix and flip” property purchases since they don’t need the money for long periods of time. Repaying the loan as soon as they resell their investment property. Others turn to private mortgage lenders when they require a second mortgage.

Typically, private mortgages are short-term loans that are usually paid off in a year or two. In the private mortgage industry, it is not the individual who comes under scrutiny but the property that will serve as collateral. The main considerations are the location and the condition of the property.

Since the lender will have to recover his money from the sale of the property should the borrower default on payments, the size of the down payment will depend on its marketability. Properties in a marketable area can get private financing of up to 85% of the value.

Private mortgages do come with additional costs. Firstly, interest rates are higher than those charged by traditional banks. Tax deductions on income-producing properties can help to alleviate these costs. In addition, there will be legal fees, lender fees, mortgage broker fees and appraisal fees. Make sure that you interrogate the additional costs up front. Some private lenders may allow you to include these costs in the mortgage.

Many private mortgage lenders specialise in particular fields so if you are looking for a private mortgage lender to assist you, you should approach a broker. The private mortgage broker should have a list of private lenders who are looking for clients. They will be able to match you up with the best fit for your investment.

The broker will collect all of the details of the deal such as the property that you intend purchasing, what you plan to use the property for, and how you plan to repay the loan. He will put together a deal that will include an exit strategy since this more expensive funding should not be used over the longer term.

Many people replace the privately funded mortgage with a regular mortgage once the property has more equity or their credit rating has improved.

If you have had trouble getting bank finance you should not give up on your dreams. There are alternatives. Give us a call If you live in the Mississauga area. We can help to put together a deal tailor-made to suit your needs.