Last Updated on
Although most Canadians have heard about private mortgages in Canada, they have only little concept or knowledge about what are private mortgages and how they work. In simple terms, private mortgages can be the perfect alternative source of financing for money borrowers. For investors, they’re usually a high return on investment opportunity.
Most banks and other money lenders need to satisfy some strict and stringent lending criteria. Moreover, they’re not willing to cross a line too far from the standard norm. This is the primary reason why banks and lenders shy away from many different financial transactions.
However, private mortgage lenders in Canada are willing to go ahead with such transactions based on the location and equity of the home. Private mortgages Canada come in very handy when major financial institutions or banks are not willing to go ahead with the transaction.
The basic concept of private mortgages is very simple. In case you’re facing a financial difficulty and can’t wait for a time consuming approval process or you’re ineligible for a standard mortgage from a financial institution or bank, a private mortgage will be your perfect choice.
There are a limited number of banks in Canada, which are responsible for a majority of the mortgages today. For some borrowers, it is nearly impossible to get a mortgage, and this means you won’t be able to receive the cash you need, and short term funds you need right away. Although it may seem like you have no additional avenues, private mortgages in Canada are available to you. Not only will these private investors front you the quick cash you need right away, they are not simply going to turn you away because you can’t meet a strict set of guidelines which are in place for borrowers. So, rather than avoid necessity, consider private mortgage lenders for the funds you need right now. When the banks say no to the mortgage application you have applied for, we are the perfect solution for you to turn to.
Most mortgages in Canada are provided through one of the main bank branches, or through leading lending institutions. However, as a first time buyer, or an individual who is trying to get the funds they need for the home, you might not qualify for the mortgage through these financial institutions. There are a set series of regulations in place, which revolve around your credit score, ability to pay on the loan, income, and other debts; if you apply for a mortgage through a bank or lending institution, they generally aren’t willing to stray away from the criteria, to provide borrowers the money they need when purchasing. So, if you simply can’t wait for an extended period of time for the lender approval, or do not meet the qualifications set for to receive the mortgage, the next option available to such borrowers are private mortgages in Canada.
What are private mortgages?
Basically, Private Mortgages in Canada are made possible by private mortgage lenders which are a group of private investors who will provide the funds needed to purchase the home or refinance, as opposed to a bank or lending institution. The short term, interest only loan will range from a period of one to three years. A benefit of the interest only loan is the fact that the homeowner does not have to pay the mortgage principal down. Basically, the home owner is only required to make interest payments on a monthly basis to the private mortgage lenders Canada that they borrow the funds with.
Private Mortgage Lenders in Canada
Private mortgages can be a great solution for homeowners who’re looking for some alternative financing options. These days, most home mortgages in Canada are under just a few major banks and financial institutions in the country. As mentioned earlier, most of them have stringent, strict and time consuming approval processes.
In case you’re a homeowner and need some immediate funds for personal expenses or renovating your house, but can’t seem to get cleared by banks or financial institutions, you can borrow this money from private mortgage lenders in Canada. This will be the easiest and most convenient option.
Whether you’re interested in buying a new home or looking for a second mortgage, but can’t get a home loan from a regular bank or financial institution, you can get a private mortgage in Canada. In simple terms, private mortgages in Canada are mortgages given through investors rather than banks or regular financial institutions.
Private mortgage lenders in Canada or investors have flexible lending processes. They are not very strict or stringent, and offer the amount without too many constraints. In most cases, you can easily get a private mortgage if you’re a homeowner and there’s some equity in your home. The amount of money you can borrow from the private mortgage lender will depend on the equity of the home.
Most of the private lenders specialize in certain categories. They become experts in some categories. For instance :
- Commercial vs Residential – Most private mortgage lenders specialize with a property type to focus their investment.
- Refinance for Renovation vs Debt Consolidation – Sometimes, lenders are also specialized on the basis of the reason for seeking a loan. Some private mortgage lenders may even provide loans to people who’re refinancing to purchase another property.
- Prefer Urban Areas – Large urban centres are always more appealing to private mortgage lenders Canada. Such areas carry more value.
- Nearby Regions – Some lenders even prefer areas where they live. This allows them to personally evaluate the real estate property. However, this is a rare case.
Private Mortgages in Canada usually take around 1 week for the application to process. Sometimes, they can even be cleared within a couple of days. The approval process for releasing the funds can take about 2-3 weeks. Private mortgage lenders in Canada always want their clients to be able to easily transfer on to a prime lender within one year to 18 months.
It is important to understand that an individual may not always qualify for a traditional mortgage. This may be caused by many different circumstances. Such a person needs a loan from private mortgage lenders within Canada. In case you’re not being approved for a regular mortgage, it doesn’t not mean it’s the end of the road. In order to reach your homeownership goals, you can contact a private mortgage lender. When banks say no to your mortgage application, We are Your Best Option.
Why private lenders are a good option for some borrowers?
Private mortgage lenders realize that the lending institutions in Canada have a very conservative approach to lending and conservative guidelines as to which borrowers will be approved. This excludes a major population of borrowers, who in fact do have the means to repay the mortgage loan that they would be taking out. But, a major benefit of private lenders is the fact that they actually look at the value of and marketability of the property in question; they don’t simply look at your credit history and past payment history, which is what most banks and lending institutions look at.
Private Lenders for Home Mortgages
When or Why would you apply with a private lender?
Not all situations are the same; so, for individuals who are declined a traditional mortgage, or simply feel they wouldn’t be approved, there are a number of viable reasons to apply through one of these private investment lenders. Some reasons include:
- You are looking to purchase an unconventional piece of property and a private lender won’t provide the funding for it.
- You can’t wait for the long, overdrawn process traditional banks put you through, and you are in need of quick cash.
- You have a poor credit history. This red flag automatically means you are going to be rejected by bank lenders.
- You are in need of a short term loan only, which a bank lender would not provide you with.
- Non-confirmable income that you earn on a regular basis, will automatically cause lenders to turn you away.
These are just a few of the many reasons why you may want to consider a private lender. Not only do they look at your property/home, and consider its value, they also provide you with the instant cash sum you need, without the long, drawn out application process the banks typically put you through.
Private Mortgage Lenders Canada
Attaining financing through conventional means is a challenge for buyers, for a number of reasons. For many people looking to buy and occupy a home, they don’t have the 10 to 20 percent down payment in the bank, and others lack the strong credit that banks and institutional lenders look for when approving a loan. For investors who are looking to buy and turn around a property in a fairly short amount of time, waiting for bank approval can often cost them a deal in which time is of the essence. In both of these cases, private mortgage lenders in Canada can step in and provide an attractive alternative for financing.
If you are looking for a residential loan for your own home, sometimes the best source for a private loan is a family member or friend. They may be looking to make an investment, and your residence could be just the ticket. They will be banking on your relationship to help ensure that the debt gets paid, and you are banking on that relationship to gain approval even though your credit is substandard for a conventional mortgage. If you do turn to a private individual or company that you don’t know for your loan, be prepared to pay higher interest rates and to pay off the loan in a shorter amount of time. Many private lenders prefer terms that range between six months and a few years. While this can be an attractive way to get into your house while you keep repairing your credit, so that you can qualify to refinance through a conventional loan before the private loan term runs out, you have to commit to those changes in your financial profile.
For commercial mortgages and investment properties, private lenders can be a real lifesaver. Getting a commercial mortgage can take months, particularly with the brier patch of extra regulations and requirements that lenders still have in place. The purpose of these additional guidelines is to keep speculation from leading the market to collapse again, but the result means that you have a pile of paperwork to fill out just for the initial application with a bank. Because you don’t have a dedicated loan officer but instead are dealing with a department or committee, each time the application hits a new person, you might have requests for “additional information.” All of this can take several months without leading you to your loan. With a private lender, you are going to pay a higher interest rate. However, you might not face as many points, and your answer will come much more quickly. You need to be prepared to pay the loan back within six months to a couple of years, but if you’re an investor, you’re not looking for a 30-year mortgage. So make sure that you can satisfy the loan, either by upgrading and flipping the property or closing a deal on other assets so that you can take care of the debt.
Amansad Financial has relationships with many private mortgage lenders in Canada, and our professionals can connect you with the financing you need to purchase the property you have in mind. Contact us today to get your next private mortgage investment started.