Last Updated on
Private Mortgage Lenders in Vancouver British Columbia
If you are considering moving to Vancouver or investing in real estate in the city, you might consider private mortgage lenders in Vancouver BC instead of going through the conventional mortgage process.
Say your about to sign another two-year lease on that BC apartment or condo. 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 writing a check 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 at least 15 (hopefully 20 or 25) percent 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,” 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.
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, but you get to start building equity as the homeowner. The interest rate is a little 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 either have the option to renew, in most cases, or if your credit score is high enough and you’ve qualified for traditional financing, you can start a bank loan at the end of that private loan and reduce your interest costs.
If your credit score is close to what the banks want but not quite there, Amansad Financial also has relationships with “Alt-A” 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 — but again, remember that Canadian law prohibits loans with terms longer than 10 years, and if you can get that credit score a little higher within a couple of years, you can replace that “Alt-A” loan with a bank loan at a premium interest rate.
Private Money Lenders in Vancouver BC
It is worth noting that it is extremely difficult to find a private lender who will put down a 30-year mortgage, so if you are planning on being the owner-occupier, you would need to have a credible reason why you don’t want to use a conventional lender and the funding in place to pay off the mortgage within several years. If you are looking for a passive income with real estate, private lenders can make a great source. 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 lien position, giving him the right to take back the property, although foreclosure is always a worst case instance. Also, the lien is entered into records at the local courthouse, which means there can’t be any misunderstandings about who has the first interest in the property.
- 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 are now on the way up, overall, 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 ask for at least 10 percent interest. If you’re looking for short-term funding for a mortgage, you’re willing to pay it because you’ll make this back over time, and if you’re too leveraged to qualify for conventional financing but know you can satisfy the loan, this can be a real 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 for less than a year. This gives you a great yield over the short term — significantly greater than what you would get from a certificate of deposit for the same time. This gives you the chance to get your yield and get out. If you’re the borrower, you get your property, pay a short-term hit for the money, but then rake in the profits as an investor, either through a flip or through finding a tenant.
Bad Credit Mortgage Lenders in Vancouver
Vancouver is one of the booming real estate markets in Canada right now, with values seeming to go up with each passing week. 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. However, one of the great features of the way mortgages work in Canada is that you amortize the note over 20,25, and sometimes 30/35 years, but you sign a loan with a much shorter term. Then, when the term is up, you either renew with that lender or look around for a better deal.
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 “Alt-A” or “B” lenders who provide funding at a slightly higher interest rate. The “C” market, also called private lenders, serve people whose credit scores are so low that lenders in the first two tiers can’t help them but have the resources to put down a significant down payment and make the payments on the note. The “C” market notes represent the highest degree of risk, which is why they come with higher interest rates.
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 $410,000 with an appraised value of $400,000, you’ll need to have at least $110,000 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 $110,000 to put down? There are some private lenders serving the Vancouver market who will go as high as 85 or even 90 percent with the LTV ratio. If you can find a 90 percent lender, you’ll only need 10 percent of that $400,000 value to satisfy. That means your down payment would be $50,000 ($40,000 + the $10,000 premium you’re paying over the appraised value of the home). The applicable set up fees will vary from lender to lender.
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. 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!