Finding private lenders is a very vital function in our society, private lenders fill a void that major banks and financial institutions do not want to fill. Private lenders will consider providing loans to people that have bad credit, even if a banks has turned the borrower down. Finding private lenders will allow you to get higher ratio mortgages when no other lender will. Finding private lenders are the main source of financing for second and third mortgages since major Canadian banks will not provide these. People who are private lenders will accept a higher level of risk and they also charge a higher interest rate, but they can get you the money you need to tide you over until you can arrange lower cost financing.
Many people are turned down by lenders because they are self employed or have unstated income such as a rental income. Finding private lenders is important because they understand that there are many Canadians that are and have been self employed for many years. Many of these people are small business owners who make an above average income but include expenses such as restaurants, automobile and travel to reduce their income. This results in a lower tax bill but may indicate that the borrower has little or no income when in fact they have a very comfortable lifestyle. A private lender will understand why your stated income is so low and factor this into your overall financial picture.
The loan to value ratio (LTV) is one of the main factors that people who are finding private lenders look at when determining if you can qualify for a loan. To find the LTV on your property you divide the total of any outstanding mortgages on the property by the present market value of your property, an example of is a home with a market value of $300,000.00 and total mortgages of $200,000.00, the LTV in this example is 66%. High LTV ratios above 75% will result in a more difficult to arrange and more expensive mortgage. Most lenders with a private investor will not exceed a LTV of 90% and will normally fund mortgages that have an LTV below 85%.
For most mortgage transactions a private lender will require an appraisal of the property. Appraisers provide an independent unbiased estimate of the present market value of a property. An appraiser will compare your house to three other similar houses that have recently sold in your area. Adjustments will be made for factors such as different house sizes or the number of bedrooms in the home. The appraised value will be the amount that the mortgage loan will be based upon, so as the property owner you should make sure the house is clean and tidy before the appraisal is done.
Lenders with a private investor can provide loans or mortgages when other lenders may have turned you down. Our brokers can match your loan requirements with a private lender that provides funds to people in your situation. For a free consultation on finding private lenders can us today.