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Private Mortgage Lenders In Vancouver British Columbia
If you are considering moving to Vancouver, the GVA (Greater Vancouver Area) or looking to take out some equity on already owned real estate in the city, you might consider private mortgage lenders in Vancouver BC instead of going through the conventional mortgage process.
Taking Out Equity & Refinancing Using a Private Lender
The process of taking out equity has been relatively easier over the past 10 year due to the steady climb in property values; however over the past 2 years values have flattened due to provincial changes to how properties are taxed; 20% Foreign Buyers Tax & also the Speculation and Vacancy Tax. You add the 2020 Pandemic and values are expected to remain flat and possibly decrease.
Despite this, Private Equity Mortgages are still available if you bank or broker can’t assist. Whether you require funds to consolidate some personal or business debt, or you have an opportunity to acquire some new real estate, an Equity Based Private Mortgage can provide you quick and easy capital. Generally in a healthy market, the maximum Loan-to-Value considered is 75%. In an uneasy market, some Private Lenders will scale back to 65%. However with additional real estate security, higher amounts can be considered.
For example, If you have a Single Family Detached Home valued at $1,500,00 and you have an existing mortgage of $750,000; the Loan to Value is currently at 50%. If you have a low first mortgage with your bank, but require $150,000 to invest in some low cost stocks, obtaining the 2nd Mortgage would increase the Loan to Value to 60% ($900,000 divided by $1,500,000 = 60%). Such loans can also be structured in a way where you’d have no payments on the 2nd mortgage for a year… Just in time for you to realize the increase in your stocks to pay out the 2nd mortgage.
This is one of many ways a private mortgage can be used to leverage existing equity to help a property owner reach an objective. Sometimes, the funds are required to overcome some financial hardship, and that also is something that Private Lenders assist with when the Banks can’t help.
Using a Private Lender to Purchase in Vancouver
Say you’re about to sign another two-year lease on that BC townhouse. It’s true that renting does have its advantages. You don’t have to worry about upkeep, and when you hit the end of that lease you don’t have to worry about selling if you want to move. However, each month, you’re making a payment that never benefits you again. For the convenience of renting, you’re just sending money down a drain and making profits for someone else — the person who owns the property.
If you’re signing that lease again because you like the convenience and flexibility that renting brings, and you have other investment vehicles bringing in money, then more power to you. If you’re signing another lease in BC because you don’t think you can get mortgage approval, though, think again. It is true that it’s harder to get mortgage approval from a bank or other traditional lender than it was back in 2007, before the housing market collapsed and the news broke that banks had been giving out tons of loans without doing any real due diligence on their borrowers. However, thanks to companies like Amansad Financial and a growing network of alternative lending sources, now is the right time to get into a mortgage, particularly with the low mortgage rates out there.
Ask yourself these questions. Do you have 25% down payment or more to put down on a home? Do you have a relatively steady income history over the past year or more? If the answer to the first question is “No,” and you don’t have other real estate that can possibly be used as additional security to lower your down payment requirement, then your best bet is to sign that lease and spend the next year or two saving up for a down payment. If you have the down payment salted away, then you probably have had steady income over the past year or more — which means that Amansad Financial can find you a mortgage for that property in BC. This assumes you’re looking for a property in a major centre or really close to, and in a stable real estate market. Properties in rural communities will require larger down payments.
Did you notice that we didn’t ask about your credit score? That’s the biggest hurdle for many of our clients. Banks look at that credit history and ignore that hefty down payment in the bank and the fact that you’ve been working for the same company for several years now, with a steady history of saving. You may have gone through a divorce, layoff or a serious illness a few years ago that wiped out your savings and kept you from making your payments on time for things like your car and your credit cards, but now you’re in good standing, for the most part — you’re just waiting for your credit score to improve enough for a bank to sit up and take notice.
This is where private lenders in BC can help you out. These are individuals or companies looking to make money in the real estate market. With a private mortgage, you get one or two years to keep building that credit score and improving your situation, but you get to start building equity as the homeowner. The interest rate is higher than what the banks charge, but you’re building equity instead of flushing more money down the rent drain. When the term of the loan is up, you usually have the option to renew. If you’ve done everything you need to do and you qualify for a bank mortgage before the end of the term, you can then pay off the private mortgage and get the most competitive rates.
If your credit score is close to what the banks want but not quite there, Amansad Financial also has relationships with “B” lenders who deal with credit scores that are just a little low of the mark. Interest rates fall between bank rates and private mortgage rates, and the terms can be longer than what private lenders will offer
Private Money Lenders in Vancouver BC
It is worth noting that it is extremely difficult to find a private lender who will provide a term that exceeds 2 years. You would need to have a credible reason why you cannot pay off the mortgage within several years. Here are four reasons why private lending works well for both the borrower and the lender.
- The security on a private loan is very good. The lender gets a first or 2nd lien position, giving him the right to take back the property, although foreclosure is always a last resort and worst case instance.
- Real estate holds a tangible value that bonds and stocks simply can’t match. If you own stock in a company, the company can go bankrupt, and the stock value can drop to zero. Even if real estate prices drop, the value of a property will never be zero. Real estate prices historically are always rising,, which means that the investment is a good idea for the lender.
- Private lending for mortgages generally offers a higher return that traditional investment. The lender can ask for points up front and can justify a higher contract rate due to the higher risk. If you’re looking for short-term funding for a mortgage, you’re willing to pay it because you’re confident that you can pay it back quickly while still putting yourself in a better position at the end of the term. It creates a win-win.
- Unlike longer term debt, private lending is designed to come back to you within a year or two at most, and many private loans have terms of 12 months. This gives you the lender a great yield over the short term — significantly greater than what they would get from a certificate of deposit for the same time. This provides the chance to get their funds in and out. If you’re the borrower, you get your property, pay a short-term hit for the money, but then position yourself to either profit as an investor, or simply position yourself comfortably as a property owner.
Bad Credit Mortgage Lenders In Vancouver
Vancouver has been one of the booming real estate markets in Canada over the past decade. However, if you are looking at Bad Credit Mortgage loans in Vancouver, you may not think that you can buy in now before values go up even further. You may have already reached out to a bank to pre-qualify, only to hear that you won’t be able to get financing, and banks often won’t work with borrowers who have poor credit.
If you have bad credit in Vancouver but are looking for mortgage options, Amansad Financial can help you find a loan to get you started toward home ownership while you work to improve your credit score. Then, at renewal, you go to a bank and see if your score is high enough for them to work with you. Amansad Financial has connections with all types of lenders, however our focus is with two types of lenders that work with people whom the banks often refuse to help. The banks are known in the industry as “A” lenders, but there are also “B” lenders who provide funding at a slightly higher interest rate. Private Lenders are also part of the B market, and sometimes referred to as C Lenders. Private Lenders serve people whose credit scores are so low that they are the only options available.
Getting A Bad Credit Mortgage In Vancouver
If you’re looking inside metro Vancouver and the closest suburbs, private lenders will want you to put down 25 percent or more in many cases, in order to get an LTV (loan-to-value) ratio of no more than 75 percent. This means that if you buy a house for $400,000 with an appraised value of $400,000, you’ll need to have at least $100,000 to put down plus applicable set up fees. This gets your mortgage to $300,000, which is 75 percent of the appraised value.
But what if you don’t quite have $100,000 to put down? The only options available are few;
- If you own additional Real Estate Security, add it to your mortgage loan request
- Look at a less expensive property so that your down payment is equivalent to 25% of the property or greater.
- Improve Credit & Continue Saving
- As the Seller to provide a Vendor Take Back Mortgage for any shortfall
If you’re buying property outside the city, you’ll need to put more down in most cases. In rural communities, many lenders won’t extend a loan of more than 65 percent LTV. Some will come up to 75 percent, but that really depends on the property and if you have additional real estate security to make the loan more attractive to a Private Lender by reducing the risk. If you’re working with a land-only purchase in BC, the highest LTV ratio you can expect is 50 to 55 percent.
Why is the LTV ratio so important? Private lenders don’t ask to see your credit score, because that’s not part of their calculation. Instead, they use the value of the property. Because of the degree of risk, they make their decision on the basis of whether or not they could get their money back if they foreclosed on the property and sold it. So the appraisal is the key document when putting together an application with a private lender.
Even so, this doesn’t mean that you should run out and hire an appraiser. Many lenders prefer to have their own performed, and some even take a dim view of potential borrowers who order their own. Instead, wait for the lender or broker to have the appraisal performed. This can be tricky, though. Consider a property listed at $900,000. If you have $225,000 to put down, and the lender wants you to put at least 25 percent down, then you might think you’re in luck. However, if the appraisal comes back at $860,000, the lender is only going to approve a loan up to $645,000. $645,000 + $225,000 only gets you to $870,000, so you don’t have enough to make the purchase unless the seller is willing to come down on the price. Given the hot market in Vancouver, you may have a difficult time getting the seller to do that. Remember, though, if you’re buying in the city, you may be able to get a lender to go as high as 90 percent LTV.
Some of our clients at Amansad Financial find themselves behind the 8-ball on their mortgages, needing to sell to stave off foreclosure. If you find yourself in this predicament, ask a realtor to perform a comparative market analysis (CMA) on the neighborhood around your property. This gives the lender more documentation to support the application. The realtor has the motivation to help you because she might score a listing from the deal if you end up being able to sell the house. No matter what you’re trying to do with regard to loan approval, though, the more supporting documentation you have, the likelier you are to gain approval.
If you already own a home in BC but need to take out a second mortgage for something like a renovation or a vacation home, Amansad Financial has relationships with lenders to give you the best deal as far as interest rate and term. No matter what your financing needs are in BC, Amansad Financial can find you the right lender for your needs. Give one of our lending specialists a call!
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