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Private Mortgage Lenders
Private mortgage is a short term secured loan. They typically run for terms of between one and three years. The borrower is not required to pay back the principle amount. The monthly repayments cover only the interest with the principle recovered at the end of the term. Private lenders have taken advantage of a gap in the market. They realized that the stringent lending criteria employed by conventional banks had left many with no recourse to the banks. Many of these would-be lenders could nonetheless afford to repay such loans. In Toronto just as in other parts of Canada, private lenders look at more than just the credit history of the borrower. They are equally concerned with the market value of the property that will secure the loan. Private lenders often specialize in certain sectors of the market. Because of this your broker can connect you with a private lender who best suits your needs.
What Is A Private Mortgage?
As of 2024, a private mortgage is a one to three-year, interest-only loan that private lenders will extend to you based on the equity in your home.
The amount that you can borrow will depend on the amount of equity in your home and your personal set of circumstances.
The interest rates on private mortgages are higher, but this reflects the greater risk to the lender.
In calculating the interest rate that you will pay, the private lender will look at the risk factors.
These include:
- The Loan to Value – the lower the percentage, the lower the risk
- Your income
- Your credit scores
Private lenders are, of course, interested in your ability to repay the loan.
They are less interested than the banks are, in your slightly tarnished credit record. You can get mortgages in the Toronto area for up to 95% of the equity in your home.
When Do You Need Private Mortgage Lenders?
There are many circumstances where conventional lenders will not approve you for a mortgage. This is when a private mortgage lender could save the day. You would need a private mortgage lender in the following situations.
- Your credit history is not good so conventional lenders will not fund you. With a credit score of less than 600 you are not likely to qualify for a conventional loan.
- The banks won’t fund the property that you want to buy because it is not a conventional property.
- You don’t have time to wait through the long approval process of the prime lenders.
- You are self-employed or unable to prove your current income, so the prime lenders won’t approve the loan you want.
- You need a loan for a short period of time.
What Interest Rates Will I Pay On Private Mortgage?
Private mortgages carry more risk for the lender.
They, therefore, attract higher interest rates. In 2024, interest rates on private mortgages range from 10% to 18% depending on the financial circumstance of the borrower and the characteristics of the property.
Rates may change in response to changes in economic conditions.
Interest rates also depend on which type of lender you use and the rate of return that the investors require.
Because you’ll pay higher interest rates for a private mortgage, you would only go this route if you cannot get loan approval from a conventional bank or bad credit lender.
What Factors Do Private Lenders Look At?
- Income – If you are unable to confirm your income, private lenders will use an estimate of your income based on an industry average.
- Property value – the lender will insist on an appraisal as the property secures the loan. In the event of you defaulting it is used to repay the capital.
- Down payment – you will need a down payment of at least 15% as the loan to value ratio of the property must be at least 85%.
- Equity for refinancing – you are allowed a maximum loan to value of 85% if you are refinancing.
How Long Does It Take To Get Approval?
It takes significantly less time to get approval of a private loan than a conventional loan. In 2024, approval will take between two and seven days. You’ll receive the funds in a matter of two to three weeks. The private lender is in the business of short-term loans. They will prepare you to change to conventional lender so that you can repay the capital on the private mortgage at the end of the term.
What Fees Will I Pay For Private Mortgage Loan?
When you borrow from a conventional lender you don’t worry about the fees as the lender pays the commission. With a private lender, however, the borrower pays the fees. There is also a setup fee for the private loan. In 2024, the fees come to approximately 1% to 3% of the borrowed amount. Fortunately, you can include the fees in the mortgage.
Tips on how to get approved for a private mortgage
Getting a private mortgage is not that difficult but it does help to prepare before you apply. Follow the tips below and you’ll have a much better chance of ensuring that you qualify.
Know your credit rating
Even though private lenders are less concerned about your credit rating than the value of the property that secures it, the lender will check your rating. It is used it to determine how a big a risk you are. The higher your credit rating the less interest you will pay on your mortgage. It is, therefore, important to know yours as a relatively small increase in interest rates can add up over the mortgage term.
Build up your funds for a bigger down payment
You will have to make a down payment on your property. The higher the down payment you make, the lower the mortgage you’ll need and the lower the repayments. The more equity you have in your property, the less the risk for the lender.
Pay existing debt
Lenders look at debt to income ratios when deciding how much they’ll lend you. Get rid of as much of your short-term debt as possible.
Ensure a stable income
If you’re thinking of investing in property, now is not a good time to resign to start your own business. Your private mortgage provider will want to know that you can make your repayments.
Have all the necessary documents ready
You’ll need proof of income, tax returns for two years, and proof of your ability to make the down payment and pay the closing costs amongst others.
Know your exit plan
While your broker will help you to design an exit plan, it will help to build your case if you already have a plan in mind.
Get A Private Mortgage In Toronto From Reliable Private Mortgage Lenders Ontario
We Offer Private Mortgage To Everyone
At Turkin Mortgage we offer a private mortgage to everyone regardless of their situation and at a lower rate. We will not turn you down with harsh guidelines; rather we will find a solution that fits your needs.
Getting your mortgage through a financial institution such as a bank can be more expensive and sometimes not even possible.
Banks are known for their stringent rules when it comes to lending money to clients. In certain cases or to certain people banks will not agree to lend to.
We Are Focused To Improve Your Current Situation
By dealing directly with a private mortgage consultant, like us, you receive flexible and open terms. Unlike at the bank, where your options a more limiting and you will be faced with additional lender fees. At Turkin Mortgage we understand and sympathize with people that are in different circumstances and situations and want to help you get the mortgage you deserve. We will focus to improve your current situation and transition you into conventional financing. Contact us to discuss what we can do for you.
Private Lenders In Toronto Are Easier To Access Than Traditional Banks
Recent legislation and rising interest rates are making it increasingly difficult for Ontario residents to obtain mortgages through traditional sources. This is why more and more would-be homeowners are turning to private mortgages to purchase their dream property.
Because private mortgage lenders are funded by investors or groups of investors, they are not bound by stringent federal legislation in the same way as regular banks are. When you obtain a private mortgage from a Ontario mortgage lender the property that you buy serves as the collateral on the loan.
Meaning that if you default, the property will be sold to recover the loan. This is why private mortgage funders are more interested in the property than in your financial position.
Private mortgages are not insured, and so the property is the lender’s only recourse should you default on your payments.
If you have failed to make the stringent application process on a regular mortgage, you could finance your property through a private mortgage. This sector is free of the rigid criteria that are in place at regulated financial institutions.
Benefits of Working with us
- Extended network of connections
- Renovation
- Self-Employed or Unemployed
- First-time homeowner
- Debt consolidation
- Recovery from bankruptcy
- One or more arrears
- You want to benefit from the consolidation of high-interest debt
- You want to make a real estate or commercial investment
- You want to purchase property that the regular banks won’t finance
You May Benefit From A Private Mortgage In Any Of The Situations Listed Below
- You have been turned down by a traditional lender
- You need a short-term loan using the equity on your home
- You need to pay property or income tax arrears
Regardless of the reasons for wanting to make the loan, our mortgage brokers in Toronto can help you tailor a loan with repayments that you can afford and an exit plan for the future. Mortgage brokers have long associations with a large number private lenders and specialize in ensuring that you are partnered with the private lender that will understand your circumstances and offer you the best package.
The loan approval processes of the major banks mean that approval can take a while and this can create a problem when a property transaction requires a quick response whereas private lenders will react quickly and can supply funds that will allow you to take advantage of an opportunity. One of the great advantages of using private lenders is their flexibility in meeting your needs.
Taking a private mortgage can buy you the time that you need to improve your credit score so that you can qualify for a regular mortgage at the end of the term.
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| Equity Loans | Starting at 6.5% |
| Private Mortgages | Starting at 5.75% |
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Alternative And Private Lenders
Of late many alternative lenders have been given a bit of a tough time by the media. Writers have tended to paint mainstream bank mortgage providers as the be-all and end-all and everybody else as the villain of the day. They use phrases such as alternative lending, sub-prime lending and shadow lending. They accuse private lenders of using the more stringent mortgage requirements of the main stream banks, to push up interest rates and drive people further into debt. This is not the case. A mortgage seeker with a good credit rating very often get interest rates from private lenders like those offered by mainstream banks.
There are three types of lender in the residential mortgage market. These are;
- A Lenders
- Private lenders
- Alternative lenders or B Lenders
Private lenders consist of organizations and even wealthy individuals who are willing and able to lend money to those who are battling to borrow money.
They serve a valuable function in the industry, since they service people when no one else will help them. On the downside their rates and fees are higher, and they don’t offer insured high ratio mortgages.
Private lenders are less interested in the borrower than they are in the property that will serve as collateral. They want to know that if the borrower defaults the property will cover the loan.
Canada has many large organizations that are in the business of offering private loans. You can, however, take a private loan from just about anybody you know who has the funds and is happy to risk them.
Before you start any loan, discussions make sure that you have consulted a licensed mortgage broker and hired a real estate lawyer to assist with the deal.
Private lenders consist of organizations and even wealthy individuals who are willing and able to lend money to those who are battling to borrow money.
They serve a valuable function in the industry, since they service people when no one else will help them. On the downside their rates and fees are higher, and they don’t offer insured high ratio mortgages.
Private lenders are less interested in the borrower than they are in the property that will serve as collateral. They want to know that if the borrower defaults the property will cover the loan.
Canada has many large organizations that are in the business of offering private loans. You can, however, take a private loan from just about anybody you know who has the funds and is happy to risk them.
Before you start any loan, discussions make sure that you have consulted a licensed mortgage broker and hired a real estate lawyer to assist with the deal.
Anyone who can pass all the rigid rules that the A lenders apply would happily borrow from them. They benefit from lower interest rates and zero additional costs unless they require a high ratio mortgage.
There are three types of A lenders
- Chartered Banks – apply the stress test. Self employed people may have a problem getting a mortgage and their early payment penalties are very high.
- Credit unions – don’t use the stress test for mortgages that aren’t insured.
- Monoline mortgage lenders – only deal in mortgages. All dealings are online or via telephone. Their biggest advantage is that their prepayment penalties are the most reasonable.
Types of private mortgage lenders
There are three types of private mortgage lenders in Canada
- Private mortgage lenders – these are private people who have spare money that they want to invest in real estate. In so doing they hope to make a better return on investment than they would get if they left their funds in the bank or invested in stocks and shares.
- Mortgage investment corporations – private people invest their money in such organizations. The organization then approves mortgages based on the value of the property that the applicant wants to buy.
- Syndicated mortgages – these mortgages are similar to the one’s described above. The syndicated mortgages are typically used to finance large and expensive projects.
Private mortgage providers often specialize in certain categories of property and/or types of loans. Some lenders specialize in commercial properties, while others will stick to residential properties. Mortgages for the consolidation of debt or, alternatively, renovations find their own specialist lenders. Still others confine their interests to well-developed urban areas.
This is good news for borrowers, since your mortgage broker can match you with the private lender best suited to your needs. Turkin Mortgage has built partnerships with a large network of private mortgage lenders so we can cover almost any niche in the mortgage market, tailoring a mortgage solution to your needs.
Do private lenders need to be licensed?
In force since the 1st July 2008, The Mortgage Brokerages, Lenders, and Administrators Act regulates the industry and sets out the licensing requirements in Ontario. According to the Act every business that engages in the mortgage industry whether trading or administering must have a licence unless they have an exemption.
The Act excludes large financial institutions from this requirement. A mortgage lender is defined as a business that lends money using a property as collateral against that loan.
Private lenders who loan money directly to the public must have a license. They can, however, use a licensed broker rather than applying for their own licences. Turkin Mortgage has formed partnerships with such private lenders and can help to match you up with a lender who specialises in the mortgage category that suits your requirements.
To obtain a licence the broker/ vendor must attend an accredited course and pass the examination.
Licensing ensures that the person dealing with your mortgage is qualified and understands the standards and regulations essential to the transfer of property. The requirement protects you at a time when you are making, quite possibly, the biggest financial commitment you’ll make in your lifetime.
Different payment options for private mortgages
- Prepayment option – You may wish to pay all the interest up front and then have the funded amount reduced by the prepaid interest.
- Accrued interest private mortgage – with this option, we defer the monthly interest payments to the end of the term, at which time you’ll pay the principal and the interest.
- Amortised blended payment plan – if you’d prefer to pay back some of the principal, this least common option may suit you. Choosing to pay off some of the principal allows you to grow the equity in your property. You can choose a longer amortization period to keep the repayments down.
Most private mortgages are interest only loans, so the lender does not pay back the principal during the term of the loan. Repayments are, therefore, lower but you must have an exit plan which must include how you mean to pay back the principal.
It is essential that you structure your private mortgage and repayment plan in a way that takes account of your long-term objectives and your current financial reality. Your broker can help you to find a solution that will ensure that you don’t put your financial well-being at risk.
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How long is the term for a private mortgage?
Private mortgages are short term loans. They are usually interest only loans that typically run for one to three years. Though the term may be a short as six months.
These loans are more expensive than a conventional loan but borrowers find them useful when the property they wish to buy, or they themselves don’t qualify for a conventional loan.
Because a private mortgage is quickly approved people also use them when they can’t wait for bank approval – perhaps they have an investment opportunity they needs quick funding approval. These loans are commonly used by property flippers who buy, renovate and sell to pay back the principal.
Private loans require the lenders to pay back the interest but the principal is usually settled at the end of the term. If you’re applying for a private mortgage must have an exit which may include any one of the following
- Take a conventional mortgage and then settle the principal amount.
- Negotiate an option to renew your mortgage at the end of the term.
- Renovate the property and sell
As people seek alternatives to conventional loans so the Canadian private mortgage market has grown. Many Canadians are unable to pass the stress test so, unwilling to give up on their dream homes, they turn to the private mortgage industry.
A private mortgage should be a stop gap on the path to growing your home equity or improving your credit rating so that you can repay your mortgage and revert to a less expensive, standard mortgage.
Pros and cons of getting a private mortgage
Conventional mortgages borrowed from one of the large banks is the route that most people take if they can. Sometimes a conventional mortgage is simply not an option and lenders have to look elsewhere to find the funds. This is where the private mortgage comes into its own.
Pros
- Private lenders are less interested in the credit history of the applicant. They use the value of the property as security against the loan. So, if you have a less than perfect credit score, or you are self-employed, a private mortgage may be your best option.
- There is less red tape so the turnaround time for a private mortgage is short. You could have an answer within days.
- Private lenders will often finance unconventional properties that the conventional banks won’t consider, making this a great option for flippers.
- Private lenders often specialise in a particular field. This is good news as you can match up with a lender who fully understands your circumstances and financial requirements.
- If you have unsecured debt in the form of credit cards and personal loans, you can consolidate this debt and reduce your repayment commitments by taking out a private mortgage. This can help you to improve your credit score and reduce your interest rate.
Cons
- Interest rates on private mortgages are typically higher than on conventional mortgage rates.
- Private mortgages are for the short term – between one and three years so you must have an exit plan.
- Closing costs are higher as you will have to pay commissions and appraisal costs.
Google Reviews
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.
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.
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.
Getting a private mortgage was not easy to be honest, but at least with Mr. Leon it was doable. Thank you for your help!
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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