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Private Mortgages are Short Term Loans

As Canadian banking controls become stricter and the criteria for qualifying become more stringent, more and more people are finding it increasingly difficult to access a bond through the bank. Yet most would love to buy a home. This is why the private mortgage industry is growing so rapidly. In 2015 this industry was already responsible for between four to five percent of mortgages in Canada, and this number is believed to be growing.

Private mortgage lenders offer short term loans typically a term of between six months and three years. The borrower is not required to pay back the principle. The result is lower repayments, as he simply pays back the interest. Over the term of the loan the borrower should work on improving his credit rating and his home equity because the aim should be to qualify for a conventional loan at the end of the term.

Circumstances Demanding Private Mortgage Use

Private mortgages are generally used in the following circumstances:

  • When borrowers do not qualify for a conventional loan either because their credit scores are too low or because they are unable to prove their monthly income as can happen to the self-employed and commission earners
  • When borrowers are not Canadian residents
  • When borrowers wish to consolidate debt, and pay off higher interest credit
  • To cover taxes, or to prevent foreclosure
  • When borrowers wish to invest in property or renovate and flip a property using a second mortgage
  • When borrowers wish to buy an unconventional property that the banks won’t fund
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The Process is Quicker and Easier

Private mortgages are both quicker and easier to obtain. Private mortgage lenders are more concerned with the value of the property and the size of the down payment than in the prior credit history of the borrower. They are interested in the condition of the property, its location and its market value since they use the property as collateral for the loan. They will base their decisions on the loan to value ratio. Institutional lenders on the other hand tend to very rigid and bound by bureaucracy.

Given the higher risk, private mortgages are considerably more expensive than conventional mortgages, with interest rates of ten to eighteen percent. Additional fees such as legal, lender, appraisal and broker fees must also be taken into consideration. These can amount to anything from one to four percent of the loan amount, and are sometimes included in the mortgage amount.

A Broker Will Match You with the Best Lender

If you plan on using a private mortgage you must have a realistic plan for the longer term. A broker can help you to find the right lender. Mortgage brokers are a great help to both lender and borrower. They generally have a wide range of lenders on their books and they can help you to match your needs with the right private lender many of whom specialise. He will also help you to structure your loan and plan the exit strategy.

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Afton Jaskolski

Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!

Davin Mills

There are a lot of mortgage brokers in toronto to choose from, I was a bit intimidated by that. Don't regret I picked CMB, they took the lead and made sure to cover all the bases

Tracy Wilhoite

I was renting an apartment for a long time and finally decided to take a big step - get a mortgage instead. Team at certified Mortgage Brokers laid out various options for me. The actual process went smooth and quick, happy with my new home.

Ryder Turcotte

My wife and I decided to refinance our mortgage and started looking for a mortgage broker in Toronto. There were so many options, so you can imagine how overwhelmed we got! After talking to Leon we decided to proceed with Certified, didn't regret that decision once. They always gave useful recommendations, were attentive, and constantly in touch. And most importantly (for us) they helped us to save some money!!

Lucy Zimmerman

Vita was great. Helped my son with all the paperwork and got him very good interest rate. On the closing date called to follow up if everything went fine. Quite a pleasant experience. I would recommend this firm for anyone who is looking a mortgage broker.

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