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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Henry Wright

Was looking for a mortgage broker in Toronto. Heard about Leon and his team from a co worker and decided to give them a call. after some time on the phone talking about mortgages and what would work best for me I was VERY impressed. They were polite and most importantly they knew what they were talking about. We then scheduled an appointment and I got my mortgage with a great rate. Definitely recommend.

Gina Carroll

Got tired of sow service and mediocre rates from my bank, so I started looking for a mortgage broker. Had some family friends recommended Leon and his team, so decided to check them out. Was very impressed with Leon, he guided me through step by step, recommended a mortgage and I ended up switching to him. My rate is better and he always answers call and emails right away.

Wilton Marble

A little while back my wife and I finally decided to stop renting and get a place of our own. After some searching we found a condo we both liked and that was in our price range. The next step was a mortgage, but honestly, neither of us knew too much of what we were getting into. We found Leon and his team after a quick search on google and have had a wonderful experience. Leon and his team of mortgage brokers are VERY knowledgable, polite, work fast and just all around very professional. They answered all our questions and we got a great rate.

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!

Wendy Langdon

Going through with this company was my best decision. These Burlington mortgage brokers are real professionals. They helped me to save thousands of dollars, I'm not sure I'd find such a good offer myself.

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