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.
FAQ QUESTIONS
Take a look at these great common private lending questions.
1. What is a Prequalification?
Answer: A Prequalification allows you to find out if you may be eligible for a Private Mortgage without impacting your credit score. If a quote is provided, and it’s acceptable to you, you can proceed with the a Formal Application.
2. What is the contract interest rate?
Answer: The Contract Interest Rates will vary depending on a variety of factors. 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.
3. Are there any upfront fees?
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 costs. These costs may include Property Appraisals, Property Inspections, Digital ID verifications, CRA Tax Verifications, Assets/Income Verifications.
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.
4. What is the Loan-to-Value (LTV) that you can finance against a property?
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.
Agricultural
- Commercial Farm – 65% to 75% LTV
- Ex. $1M property would be a maximum of $650,000 to $750,000
- Maximum $1.5M (higher on exception)
- Hobby Farm – 65% to 75% LTV
- Ex. $1M property would be a maximum of $650,000 to $750,000.
- Maximum $1.5M (higher on exception)
Note: Additional quality real estate collateral can potentially increase the LTV.
5. How much down payment is required?
- Required down payment is 20% – 25% or greater
- Required down payment is 30% – 35% or greater
6. What are the pre-payment penalties?
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.
7. What are the fees associated with getting a private mortgage?
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.
Examples:
- 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 4.0% of the gross mortgage ($12,000)
- For a Mortgage Loan of $200,000, the Brokerage Fees are approximately 5.0% of the gross mortgage ($10,000).
- For a Mortgage Loan of $100,000, the Brokerage Fees are approximately 7.5% of the gross mortgage ($7500).
- 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. Lender Fees will generally range between 0% – 2% of the Loan Amount for a standard 12 month term.
Lender Legal Fees vary depending on the details and complexity of the file.
Please note:
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.
8. What are my options at the end of the term?
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 potential options if you don’t intend to sell you property:
- Renew
- Refinance with a Private Lender
- Refinance with a Semi-Traditonal (B-Lender)
- Refinance with a Bank/Traditional Lender
Note: All the above are subject to Lender Approval.
9. If I don’t have enough equity in my property, do I still have options?
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.
10. What is the advantage of using private lending brokerage over a direct private lender?
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.
- MIE (Mortgage Investment Entities) 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.
11. How long does the process take?
Answer: The entire process for a Standard Residential loan request can be completed in 2 – 3 weeks. Provided no unexpected delays and the requested documents for an application are received before due date, funding can generally occur within 7 business days after property appraisal has been reviewed.
Small & Mid Sized Commercial and Blanket Mortgage loan requests can generally be completed in 4 – 8 weeks provided there are no delays. Funding can generally occur within 10 – 14 days after the property appraisal/valuation has been received and reviewed. The Larger and more complex the request, the longer the process.
Note: The most common delay in the process is due to Customers/Clients not providing the required documents for their application in a timely fashion.
12. What documentation will I need to provide?
Answer: A standard application will require the following:
- ID & AML – Digital Encrypted Verification using 1000+ data points
- Individual Monthly Bank Statements – 3rd Party Verification may be required
- CRA Personal Tax Verification – 3rd Party Verification
- Property Tax Statements (If applicable)
- Mortgage Statements (If applicable)
- Income Statements (If applicable)
- CRA Corporate Tax Statements (If applicable)
- Property Insurance
- Appraisal(s)
Note: Additional documentation may be required depending on application details.
13. If I own other real estate, can I use as it as additional security to get the mortgage loan?
Answer: YES. This is referred to as a Blanket Mortgage.
14. Are payments interest only OR principal and interest?
Answer: Most Private Lenders provide 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.
15. What are the steps in obtaining a private mortgage with your company?
Answer: Below is the easy and simple process after receiving a quote.
- Complete Secure Application & Consent Forms
- Complete Regulatory Compliance ID Verification
- Confirm Secure Application Details
- Provide Supporting Documents – A Secure Upload Link will be provided
- Appraisal (Must be Ordered by Brokerage/Lender)
- Sign Conditional Approval Documents & Complete Brokerage Secondary Digitial ID, Fraud, and PEP AML Verification
- Sign Mortgage Registration Documents with Your Lawyer
- Complete
After You have finished signing with your Lawyer, Your Lawyer will send the completed documents and required documents back to the Lender’s Lawyer for review. Once the review is complete and all items have been received, the funds will be sent to Your Lawyer. In some cases, depending on the nature of the file, funds may be deposited directly into your account.
16. Can extra payments be made towards the mortgage without penalty?
Answer:
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.
17. What is the minimum and maximum loan size that will be considered?
Answer:
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.
18. What is the minimum and maximum property value that will be considered?
Answer:
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.
19. Where are your offices located?
Answer:
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
20. Why are some income documents required for an equity mortgage?
Answer:
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.
21. What does APR mean?
Answer:
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.
22. Is an appraisal required to get a mortgage with your Brokerage?
Answer:
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).
23. What type of properties are considered?
Answer:
Fee Simple and Strata (Condo) properties will be considered. The more marketable the property, the more desirable it is to lend on. Pride of ownership must be evident. Properties that lack pride of ownerhsip and/or poor condition will result in higher rates and/or a lower loan amount , or a possible loan being declined.
Leasehold, Rented Pads, and properties within a MHP (Mobile Home Park) are considered on a case by case basis.
24. Can I get a private mortgage with your company if I owe taxes?
Answer:
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.
25. What are some reasons to obtain a private mortgage?
Answer:
Below is list of common reasons why a private mortgage is requested:
- Purchase
- Refinance
- Equity Take Out/2nd Mortgages
- Foreclosure Refinancing
- Non-Renewal Refinance
- Credit Challenges, Bad Credit or Lack of Credit
- Payout out Consumer Proposal or Orderly Payment of Debts
- Paying out Canada Revenue Agency Tax Arrears
- Bankruptcy Annulment refinancing
- Post Bankruptcy Financing
- Paying out Collections, Judgements, Writs on Title
- Home Improvements
- Self-Employed, Non-Traditional Income Challenges
- Financing using a Holding Company or Corporation
- Spousal Buyout
- Alternative Reverse Mortgage up to 40% LTV (No Age Restrictions)
- Renovation/Flip
- Bridge Financing
- Financing for Multiple Properties
- Real Estate Backed Secured Inheritance Loans
- Real Estate Backed Secured Settlement Loans
And more…
26. What is the best way to contact your company?
Answer:
If you are a first time customer please use Contact Us found on the website. Once completed, you will receive an instant email from Admin. All Unknown/New Calls will go to voicemail and a text message will be sent with instructions. There are 3 primary reasons for this.
- Customer & Client Screening to avoid Spam, Scam & Robo Calls.
- Efficiency – We cannot speak to all customers throught the day, but all web inquiries are replied to within 1 business day.
- Phone Call, Contact Us, and new Prequalficiation Time Management
Please note that phone calls are reserved for existing customers/clients and new customers that have accepted a no-obligation quote and that are already in the formal application process.
27. Why does your company ask alot of questions before providing a quote?
Answer:
We need to ensure loan suitability. We are not in the business of providing false hope. We hear to many stories of customers workign with other companies that are quoted and waste many weeks only to be informed that they cannot assist.
We also want to ensure a private mortgage is required. In some cases, it is determined that a private mortgage is not required and may qualify for lower cost Traditional Financing arrangement.
Lastly, we want to ensure the private mortgage is suitable and positons a customer to improve their situation. If we are unable to provide a quote, we would like to be able to refer you elsewhere with confidence.
28. What's the difference between HELOC and home equity loan?
Answer:
A HELOC is also referred to as a Home Equity Line of Credit. It is Revolving Loan that is similar to a Credit Card in which you are provided a limit that you can access, pay down and access again when needed. You make regular payments based on the amount owing for the month.
A Home Equity Loan is a single advance loan. You are provided the funds in a lump sum and make regular payments on it. Payment with private lenders is usually interest only loans because our loans are generally short term. Most people that get these types of loans with payout at the end of the term by refinancing or sale of the property. Extension may be possible with good repayment history.
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.
Repayment History
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.
Employment Changes
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
(The world moves FAST, RESPECTING your time is important.)
Amansad Direct Lending Group