Great Private Lending Questions
If you are trying to take out a mortgage to buy that new house or simply needing to consolidate debt, but you’re having a hard time getting financing from a traditional lender; private lending is a great short term solution to get the financing.
Take a look at these great common private lending questions.
Answer: The Contract Interest Rates will vary depending on a variety of factors. Such factors include; market conditions, property type(s), property location, property use, size of the mortgage, mortgage position/rank,, and the applicant details. Get in touch so that we can assess your request without a credit check.
Note: The Contract Interest Rate does not include any Fees and Costs associated with obtaining a mortgage.
Answer: There are no upfront Brokerage, Lender Fees, or Lender Legal Fees on Residential private mortgages. (Some rare exceptions apply)
The Borrower is responsible for 3rd party appraisals and/or property inspections.
Borrower is also responsible for their own Lawyer Fees. This is generally paid at the time of final signing, but can be also be paid with the new mortgage funds. Borrower must confirm with their Lawyer.
Commercial Mortgages will have a non-refundable Retainer/Application “Working Fee” after a LOE (Letter of Engagement) has been signed and returned.
Answer: Much like the contract rate, the LTV will vary depending on current market conditions, property type, property location, property use, the size of the mortgage, and whether the mortgage is in 1st or 2nd position. Get in touch so that we can quickly assess your request without a credit check. Below is a general recap of maximum LTV ranges (Some exceptions do apply):
Residential Properties (With Existing Buildings)
- Urban City Centres – 65% to 80%
- Ex. $1M property would be a maximum of $650,000 to $800,000.
- Rural Communities – 55% to 70%
- Ex. $1M property would be a maximum of $550,000 to $700,000.
Commercial Properties (With Existing Buildings)
- Urban City Centres – 55% to 65%
- Ex. $1M property would be a maximum of $550,000 to $650,000.
- Rural Communities – 45% to 55%
- Ex. $1M property would be a maximum of $450,000 to $550,000.
Land (No Buildings)
- Urban City Centres – 45% to 55%
- Ex. $1M property would be a maximum of $450,000 to $550,000.
- Rural Communities – 35% to 45%
- Ex. $1M property would be a maximum of $350,000 to $450,000.
Note 1: Additional quality real estate collateral can potentially increase the LTV.
- Required down payment is 20% – 25% or greater
- Required down payment is 30% – 35% or greater
Answer: Pre-payment penalties vary depending on the type of deal and the objective, but the common industry standard on closed mortgages is 3-months interest pre-payment, or a fixed percentage of original registered principal amount. Some provide open or partially open options.
Answer: Fees Vary depending on the loan size and specific of the loan application. For a Mortgage Loan of $1,000,000; the Brokerage Fee is approximately 1.5% – 2.0% of the mortgage amount ($15,000 – $20,000). These Fees are deducted from the mortgage and are not an upfront out of pocket expense. For Mortgage Loan that is under $1,000,000, the Brokerage Fees are a higher percentage of the gross mortgage due to the smaller loan size.
- For a Mortgage Loan of $500,000, the Brokerage Fees are approximately 2.5% of the gross mortgage ($12,500)
- For a Mortgage Loan of $400,000, the Brokerage Fees are approximately 3.0% of the gross mortgage ($12,000).
- For a Mortgage Loan of $300,000, the Brokerage Fees are approximately 3.5% of the gross mortgage ($10,500)
- For a Mortgage Loan of $200,000, the Brokerage Fees are approximately 4.0% of the gross mortgage ($8,000).
- For a Mortgage Loan of $100,000, the Brokerage Fees are approximately 5.0% of the gross mortgage ($5000).
- For a Mortgage Loan of $50,000, the Brokerage Fee are approximately 10.0% of the gross mortgage ($5000).
- Any Mortgage that is less than $50,000 is on an exception basis.
The Lender Fees (If applicable) Lender Legal Fees, Closing Costs and any applicable Tax arrears are a separate cost and also deducted from the mortgage, and determined by the Lawyers.
The Fees may vary depending on the details and complexity of the file.
The Borrower Legal Fees are the responsibility of the Borrower. This can be paid directly to chosen lawyer OR deducted from new mortgage funds.
The Borrower is responsible for the appraisal costs. This is paid directly to the appraisal company.
The Borrower is responsible for any property inspection costs (if applicable). This is paid directly to the Inspection company.
Answer: As a property owner, it is your responsibility to put yourself in the best position possible to transition from private financing. When your maturity date is coming up, you will essentially have the following options if you don’t intend to sell you property:
- Renew – This is generally provided as long as all payments are made as agreed, the property is in satisfactory condition, the property/personal tax, and corporate taxe (if applicable) are all current. Subject to Lender Approval
- Refinance with a new Private lender – Subject to Approval (Our Brokerage may be able to assist)
- Refinance with a non-Private Lender – Subject to Approval (Our Brokerage may be able to refer you)
Answer: The options when property is lacking are few, but there are options. If the property is in an urban center or direct surrounding area and there is 10%-15% equity, the options would be as follows:
- Provide some cash injection to meet a private lender’s criteria for the loan to value requirements.
- If other property is owned where there is adequate equity, a blanket mortgage can be considered.
- Sell your property. If the equity is less than 10%, the suggestion is to simply sell your home if you are in a foreclosure situation. (Refinance Situations)
- Enter in to Rent-to-Own Refinance program. This is when an investor purchases the property from the property owner. A separate agreement is also prepared by both parties with the intention of the home being purchased back at a predetermined date.
Answer: Looking for direct private lenders can be time consuming. If a direct private lender is found, it is possible that they may not be regulated by their provincial body. Mortgage Brokerages are regulated. The most common ways our Brokerage is able to assist is as follows:
- Amansad Direct Lending Group’s network of Individual Private Lenders (IPLs)
- MIC (Mortgage Investment Corporation) Partners.
- Amansad Direct Lending Group Approved syndicated Private Lender Groups.
- Amansad Direct Lending Group approved Rent-to-Own Facilitators.
A majority of the mortgages provided are funded within our group of IPLs. In the event you are looking for a Bank/Semi-Traditional mortgage, we can direct or refer you after an assessment has been completed.
Answer: The process is fast provided we are receiving requested documents in a timely fashion. The entire process can be completed in 2 weeks provided there are no delays. Funding can generally occur within 7 business days after property appraisal/valuation has been received and reviewed.
Answer: A standard file will require Photo ID verification, Banking verification, CRA Tax Verification, an appraisal, a current mortgage statement (if applicable), a current property tax statement (if applicable), and confirmation of property insurance as listed below:
- ID is provided and verified using Secure Software technology.
- Bank Statement/Verification
- Property Tax Balance Statements (If applicable)
- Mortgage Balance Statements (If applicable)
- Income (If applicable)
- CRA Personal Tax (May require 3rd party tax verification)
- CRA Corporate Tax (If applicable)
- Property Insurance
Our brokerage processes are in place to curb Identity Theft and enhance Fraud Protection and Detection.
Note: Some more complex files may require more documentation.
Answer: Mortgage Payments are generally interest only. The cost difference over the course of a 12 month term is minimal.
- Assuming a 8% interest only on $100,000 would have a payment of $666.67 per month with a balance of $100,000 at the end of the term
- An 8% principal & interest with a 30 year amortization would have a payment of $724.71 per month with a balance of $$99,142.83 at the end of 12 months.
Private mortgages are short term transition solutions. It makes more sense from an accounting perspective to keep the loans simple.
Answer: Payments are made monthly on the 1st or 15th of each month. Payments can also be partially prepaid, or fully prepaid with no payments during the term provided there is sufficient equity.
Answer: Below is the easy and simple process after receiving a quote.
- Complete Secure Full Application
- Provide ID Verifications
- Provide Supporting Documents
- Complete Appraisal
- Sign Approval Documents
- Sign Mortgage Registration Documents with Your Lawyer
Yes, on a case-by-case basis. Some of our Individual Lender Partners will allow additional payments can be made towards the principal.
The mortgage is closed, but can be paid out in full anytime. Prepayment Fees are dependant on when the mortgage is paid out and the terms of the mortgage.
The general loan minimum is $50,000; depending on the details of the loan request and total combined loan-to-value. In some cases, a smaller loan amount may be considered.
There is no maximum loan amount. We have a wide variety of Investor/Lender partners that are able to cater to jumbo sized loans. In some cases, the timing of the loan request determines the availability.
The general property value minimum is $150,000 depending on the details of the loan request. In some cases, lesser amount may be considered it the request makes sense and/or if there is other real estate collateral.
There is no maximum property value.
Amansad Direct Lending Group is an E-Commerce Brokerage with Registered Offices in BC, Alberta, Saskatchewan, Ontario, and Manitoba.
- 2500, 10123 99st NW Edmonton AB T5J 3H1
- 202, 1433 St.Paul St. Kelowna BC V1Y 2E4
- 200, 4500 2nd Ave Saskatoon SK S7K 2C3
- 660, 1600 Carling Ave Ottawa ON K1Z 1G3
- 2200 – 201 Portage Avenue Winnipeg MB
Despite a mortgage being an equity mortgage, some of the documents that one would require when applying at a bank may also be requested. The difference is a bank will decline if it does not like the information provided, but an equity mortgage lender will approve with similar documentation (or lack thereof).
Due diligence is still required. If a Brokerage places an individual into an equity mortgage without verifying the need, the Brokerage can expose themselves to legal action in the future for negligence which can negatively impacts the Brokerage’s insurance policy.
Generally, the information requested is not for qualification purposes, but instead for compliance.
APR means Annual Percentage Rate. It represents all the costs related to loan over the course of a year. It essentially the total interest costs and applicable fees. An APR provides a true cost of a loan. There are however some fees that are excluded from the APR calculation. See https://amansadfinancial.
Yes, nearly 100% of the time. Appraisals are ordered by the Brokerage or the Lender. The cost of the appraisal is the responsibility of the Borrower(s) and it is paid directly to the appraisal company. Prior to applying, and for your own information purposes, you can contact a Realtor for a CMA (Comparative Market Analysis).
Fee Simple and Strata (Condo) properties will be considered. The more marketable the property, the more desirable it is to lend on.
Leasehold, Rented Pads, and properties within a MHP (Mobile Home Park) are considered on a case by case basis.
Crown Land is NOT considered.
The short answer is YES. If taxes are owing they will need to be paid out using the new mortgage funds. Taxes consist of Municipal/Property Taxes of the property, Personal Tax, and Corporate/Business Tax.
Below is list of common reasons why a private mortgage is requested:
- 1st Mortgages, Equity Take Out/2nd Mortgages for Emergency Situations
- Credit Challenges, Bad Credit or Lack of Credit
- Currently in Consumer Proposal
- Recently Discharged from Bankruptcy
- Foreclosure Refinancing
- Paying out Canada Revenue Agency Tax Arrears
- Paying out Collections, Judgements, Writs on Title
- Home Improvements
- Investor Renovation/Flips
- Financing for Multiple Properties
- Bridge Financing
- Self-Employed, Non-Traditional Income
- Financing using a Holding Company or Corporation
- Spousal Buyout
5 Steps To Success With Private Lending
If you’re going to obtain some private lending, you’re starting a relationship that will work a little differently than what you can expect from a bank or other traditional lender. Let’s take a look at some of the key differences, so you’ll know what you have in store.
Most people obtain private lending as a solution to get started on home ownership while they’re still repairing their credit. Private Lending is short term (often one to two years) and commonly allow for interest-only payments. Private lenders do not have to renew mortgages when the term expires, so you want to keep your options open by making your repayments on time.
If you change employers during the term of a private mortgage, there are no requirements mandating that you update that information. However if you do provide that update, you strengthen your relationship with the private lender, showing that you are serious about bettering your financial situation. Even if you haven’t notified your private lender of the change, that may be a requirement for extending or renewing the loan.
Improving Your Credit
If you took out a private mortgage while you intended to improve your credit, there are improvement counselors who can help you get that score up. The purpose of this is to help you qualify for a bank loan when the private lending mortgage term expires – which will save you tens of thousands of dollars over the amortization of the entire mortgage.
Obtaining New Credit
Try to avoid opening new lines of credit, and keep your credit inquiries to a minimum during the term of your private mortgage loan. These activities can affect your score adversely, which definitely will not help you when it’s time to shift from private lending to a traditional lender.
The Value of Communication
Remember – a private lender is entrusting you with a great deal of capital. The clearer your communication is, the stronger your relationship will be. Private lenders are much more willing to work with borrowers who are honest and upfront.
NEED MORTGAGE FINANCE, REFINANCING,
OR A SECURED ASSET LOAN?
✔ Same Day Response
✔ Fast, Efficient, & Friendly Service
✔ Private Mortgages are based primarily on Equity and the Property
✔ Bad Credit Mortgages are based primarily on Equity and the Property
✔ Traditional & Semi-Traditional Options also available
✔ Equity Based Secured Asset Loans
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