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Government regulations on mortgages and qualification requirements stringently applied by mainstream lenders in Canada are making it increasingly more difficult for people to qualify for a standard mortgage.

Private Mortgage Lenders’ Rates

Private investors are prepared to trade higher risk for higher returns. They realise that the strict criteria applied by the banks is preventing people who are able to pay back loans from borrowing. Those prepared to pay the higher lenders’ rates may qualify for a private mortgage.

Private mortgages make up around four to five percent of the property loan market in Canada. These loans are generally taken over the shorter term, somewhere between one and three years.

The borrower is not expected to pay back the principal. Paying only the interest means that the amount that has to be paid monthly is reduced. Because this is a short-term mortgage, the borrower should have a long-term plan in place.

When It Is Difficult to Get a Mortgage Through Mainstream Banks

Circumstances that create the need for private mortgage lenders.

  • The borrower does not qualify for a mortgage due to poor credit history
  • Funding for unconventional homes that the banks will not cover
  • The borrower is self-employed and unable to provide proof of steady income
  • The borrower is recently employed, or temporarily out of employment
  • Non-residents

Private mortgages may make it possible to take advantage of circumstances.

  • Second mortgages for home improvements prior to selling
  • Second mortgages to top up the first where the buyer cannot make up the difference between the seventy or eighty percent mortgage and the purchase price of the property
  • For construction projects to circumvent restrictions placed on these projects by mainstream funders.

Private mortgages are normally more quickly and easily obtained than conventional mortgages as the providers of these funds are happy to use the property as security. The decision will be based on the intrinsic value and location of the property. The creditworthiness and income of the applicant is less important to the lender as the property secures the mortgage. Typically, a mortgage will only cover 85% of the value of the property, and the borrower will be expected to make a down payment. The bigger the down payment the less the risk to the investor.

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Private Mortgage Lenders’ Interest Rates

As with all investments, the private lender will expect to receive higher interest rates for higher risk so the private mortgage does come at a cost. The interest rates are usually between ten and eighteen percent per annum. Obtaining the private mortgage can also run up additional costs of between one and four percent of the total loan amount for legal, broker and lender fees, but they are a great solution for home owners who are facing foreclosure, who have property tax arrears or who need an opportunity to improve their credit rating.

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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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