Due to the strict nature of bank lending requirements, getting a bank mortgage can be very difficult. For those rejected by banks, using a private mortgage lender in Vaughan offers a viable alternative to secure the needed funds. Vaughan private lenders are also unaffected by legislation targeting other lending institutions like banks and credit unions. Private lenders have more relaxed lending rules and can lend money when banks won’t.
With the value of homes at some of the highest levels ever, homeowners in the city can tap into their growing home equity with the help of a bank or a private mortgage lender in Vaughan.
What Are Private Lenders?
Private lenders are individuals or companies that lend money for profit. Since Vaughan is an up-and-coming city with a growing population and strong economy, private lenders are willing to lend money to borrowers in the region. Private lenders in Vaughan can provide loans worth millions for many years or loans as small as $30,000 for one-year terms.
These lenders will provide funds in exchange for equity, usually a home, but also cars, plots of loans, and other high-value assets. Securing mortgage loans with property reduces the risk of default, as the property can be sold to recoup any losses.
Common Reasons for Needing a Private Mortgage
Before a private lender provides financing, they will ask why it is needed. There are many valid reasons for needing private lender financing. Some of the most common reasons are:
- Paying off high interest debts
- Making property repairs
- Renovations
- Loss of employment
- Stopping Power of Sale or Foreclosure
- Getting additional education
Many will turn to private lenders for debt consolidation loans. These mortgage loans can be large enough to pay off all the borrowers’ debts and replace them with an easy-to-manage loan with a much lower interest rate than credit cards. This private mortgage loan helps borrowers eliminate debt and save money from reduced interest charges.
Fast Private Mortgage Loans
Canada’s major banks have a lengthy and in-depth mortgage approval process that can take months to complete. These institutions cannot expedite their processes, potentially causing complications for time-sensitive real estate deals. Some real estate deals may collapse without prompt financing, making a private lender more appropriate.
Private lenders can meet tight deadlines, often finalizing loan agreements within a week of starting the application process. This can make them particularly useful for borrowers who need quick access to funds.
Why Private Lenders Invest in Vaughan Real Estate
Vaughan boasts Canada’s first smart hospital, abundant green space, large homes, low crime, a booming industry, and over 19,000 businesses. Its population grew by 5.5% from 2016 to 2021, surpassing 400,000 in 2022, and it shows no signs of slowing down. As one of Canada’s most livable cities with a fast-growing population, Vaughan’s real estate market has been experiencing a boom throughout the past decade. In April 2024, the average price for a home in Vaughan, Ontario, reached $1.28 million, according to the Toronto Regional Real Estate Broad (TREBB).
Many live in Canada’s 17th largest city for job availability and proximity to Toronto. This has helped fuel demand for housing, creating a red-hot real estate market. This boom is not limited to Vaughan alone. Neighbouring communities like Kleinburg and West Woodbridge have also experienced fast-growing real estate markets during the same time period. In Kleinburg, home prices grew from $949,000 to 1.8 million from August 2012 to 2022, while West Woodbridge home values jumped from $435,000 in 2012 to $1.1 million in August 2022.
If you own a home in Vaughan or surrounding communities, you can work with private mortgage lenders to take advantage of your home’s growing equity and tap into your accrued wealth. Those seeking private lenders are often rejected by major banks due to strict income and credit score requirements.
Private Lender Mortgage Requirements
Those turning to private lenders are often rejected by major banks due to stringent income and credit score criteria.
Private lenders do not penalize borrowers with a low credit score; the most important considerations are the home’s price and the value of any existing debts attached to the property. Private lenders use the Loan-to-Value ratio (LTV) to approve loans. The LTV of a property is equal to any debts attached to it subtracted from the estimated selling price. For example, if a property is worth $1,000,000 and has a mortgage totalling $650,000, then the current LTV of the property is 65%. For properties in Vaughan and across Ontario, the maximum LTV a private lender will go up to is 75%.
Private lenders will charge interest rates ranging from 7% to 14%. A credit score doesn’t decide mortgage loan eligibility but impacts interest rates; lower scores mean higher interest rates. When finalizing a private mortgage loan, the lender charges administration fees ranging from 3% to 6%. These fees will go towards paying the staff to create the loan agreement and all the other legal paperwork needed.
How to Find Private Mortgage Lenders in Vaughan, Ontario
Private lenders typically do not advertise widely; most people learn about them through word of mouth or research. Search ‘private mortgage lenders Vaughan’ or ‘private mortgage lenders in Ontario’ on Google to find potential lenders to work with.
Another way you could find private lenders in Vaughan is by working with an experienced broker like the team at Mortgage Broker Store. With over a decade in Ontario’s real estate, we’ve built a network of private lenders across the province. We have a network to connect you with lenders who offer the most advantageous loan deals you need. As a direct private lender, we offer financing options if no better deal is available elsewhere.