Many Canadians have found it difficult to obtain a mortgage through a bank or other traditional mortgage lender. Whether due to high credit card debt, negative items reported on their credit report, a consumer proposal, self-employment income, or another reason that has led to a mortgage decline it no wonder why many Canadians are seeking a different path to home financing.
Private mortgages are often the best choice for those who need alternative financing for their home purchase or refinance.
what is a private mortgage lender?
A private mortgage lender is an individual, group of individual investors, or mortgage investment corporation that offers loans to purchase or refinance a house, even if you do not meet the strict qualification guidelines of banks or traditional mortgage lenders. Although private mortgages have a higher interest rate, they also offer a great opportunity for homeowners who do not qualify for a loan through traditional means or for current homeowners who need to refinance their home to cover the cost of renovations or other expenses.
Private mortgage lenders will look at your financial situation differently than traditional mortgage lenders. For instance, the first consideration may be whether you have a down payment to purchase the home. Typically, you will need documentation that you have at least 20% of the value of the home available at the minimum as a down payment before being considered for a private mortgage.
Private mortgage lenders will also consider your credit report, but they each use different criteria to determine your eligibility. For instance, most will look carefully at your pay stubs and monthly expenses to determine if you can afford the home you seek to purchase without defaulting on the loan. However, some private lenders will pay closer attention to other factors, such as income tax returns, and the type and value of the property you would like to purchase, and an exist strategy. The lender will require documentation that your financial status meets its unique criteria when evaluating whether to finance a home for you.
Unlike traditional mortgages, there is little regulation on private mortgages. The terms of a private mortgage agreement are different for every lender, and some of those terms may have unexpected obligations and may cost you much more than expected. Private mortgage lenders are aware that most people who use their services have some kind of financial difficulty, so there it is important to partner with a reputable mortgage broker to help you find the right private lender.
If you are interested in exploring options for a private mortgage, you will need a mortgage broker who is knowledge about which private lenders are reputable in order to protect your assets. Contact me today!