Everything You Need to Know about Private Mortgage Lending
Most, if not all, Canadians require a mortgage to buy a home. That’s why it can be a little disheartening that the process to get approved for these mortgages can be quite difficult. Not only will you need to be in a good place financially, but you’ll also need to meet the lender's requirements for income, debt, and credit score. But what if you can’t meet these requirements? Are there any other options for you? Well, you’ll be glad to know that you can make use of private mortgage lending. But what are private mortgages? If you want to know the answer to this question, read on as we break down everything you need to know about private mortgage lending.
What Is a Private Mortgage?
A private mortgage is a loan offered by institutions to homebuyers that are unable to secure traditional loans due to financial constraints. Homebuyers may look to make use of private mortgages if they have a poor credit history or don’t meet the requirements of the lenders. These terms are short-term and are closer to typical amortization periods lasting anywhere from six months to three years.
It’s important to note that the interest rates for these types of loans often come with higher interest rates. This is mainly because the payments that borrowers will be making on this type of mortgage are interest-only. Consider this the trade-off for more lenient requirements.
What Are the Requirements for Private Mortgages?
While it is relatively easier to secure a private mortgage, there are still some things that you’ll need to have at the ready. Be sure to prepare these requirements so that the process will go as smoothly as possible:
Proof of Income: You’ll need to be able to prove that you are capable of paying off the mortgage. The only way to do this is to provide proof of income. This should be pretty straightforward in most cases but you’ll need extra documentation if you are self-employed.
Downpayment: You’ll also need to have cash at the ready as you will be required to pay a minimum downpayment of 15% of the property’s value.
Sellable Property: If the borrower defaults on the payment, the lender will want to take possession of the sellable property in order to make their money back.
When Is It a Good Idea to Get a Private Mortgage?
Private mortgages can be rather useful as long as you make use of them correctly. If you have poor credit history and are unable to secure a traditional mortgage, then private mortgages are just what you need. Another instance wherein private mortgages will come in handy is if you need the money as soon as possible. These mortgages tend to be processed faster than traditional mortgages, so they’ll be quite useful if you need to secure a mortgage in a short amount of time.
THE BOTTOM LINE
We hope this article proves to be useful when it comes to furthering your understanding of private mortgage lending. As you can see, private mortgages can be quite useful when utilized in the right situation. Be sure to keep everything you’ve learned here in mind so that you can make the most informed decisions for your finances.
If you’re in need of a private mortgage in Canada, then you’ve come to the right place. Do you want to learn more about mortgage financing in Canada? Level Up Mortgages supports homebuyers and homeowners in attaining success in their mortgage journey with mortgage strategy, digital mortgage education, and introductions to all the other experts you need to succeed in home buying and your personal finance. To assist homebuyers and homeowners in purchasing or refinancing new homes, we work with premier banks and best-rate mortgage lenders in British Columbia and Ontario. Get in touch with us today!