Just as in the GTA as a whole, Burlington has become a very desirable place to reside. Location is top of the list for many when they have chosen Burlington to call home. With proximity to downtown Toronto including several very efficient transport options, Burlington provides a more relaxed lifestyle for many as compared to the hustle and bustle of Central Toronto.
Located on Lake Ontario with plenty of access to lakeside biking and walking opportunities near the lakeshore and a host of local amenities for working professionals and families, Burlington offers many opportunities to live a pleasant lifestyle. With a population estimated to be 250,960 as of the latest 2017 population census, Burlington continues to attract homebuyers.
The enviable lifestyle that Burlington offers does come without a price tag. Recent real estate statistics reflect this reality. The price of an average single detached property has risen by nearly 17% since June 2020 to $1,043,995. Houses are selling very quickly with a median number of days on the market of 10 from listing to selling.
What Types of Lenders Are Available for the Burlington Homeowner/Borrower?
Borrowing to finance a home has always involved meeting certain criteria. With near-perfect credit, ample household income that is easy to prove as well as any additional assets continue to make obtaining a mortgage a relatively straightforward process.
Before 2016, mortgage financing was more attainable. Many borrowers had approached banks and other lenders for financing. Lenders were able to offer discounted mortgages and criteria were not as difficult to reach.
With the introduction of mortgage stress tests that required borrowers, or those renewing mortgages with new lenders, it has become more difficult to secure mortgage financing from the banks. June 01, 2021, saw even tougher mortgage stress rules come into effect.
Although those with exemplary credit and high household income coupled with relatively low debt ratios as compared to overall income can pass bank-imposed mortgage stress tests, others with less than perfect credit pictures may need to look towards alternative forms of mortgage financing.
Fortunately, there remain many several lending options available to both first-time borrowers and existing homeowners. In Ontario, there exist three categories of lenders based primarily on credit standing and debt levels of borrowers:
- A Lenders- These lenders are represented by the banks. These lenders have very stringent criteria when it comes to mortgage financing. Banks will be looking for near-perfect credit, substantial, easy to calculate yearly income, and low debt ratios.
- B Lenders- These lenders are made up of Credit Unions and Trust Companies. While slightly less stringent than their bank counterparts, B lenders still require a credit score of at least 550 which means strong credit is still necessary. Credit unions also prefer easy-to-calculate and substantial yearly income and low debt ratios to approve mortgage financing.
- C Lenders-There exists other lenders in the Province that are Private lenders (C lenders). A private lender will be able to overlook damaged credit and high debt ratios and look to other criteria to approve private mortgage loans.
How Are Private Mortgage Loans Structured?
Opting to go with a C lender (Private lender) is a great decision if credit has become an issue and a Burlington borrower is looking for a short-term mortgage loan. Just as the banks have criteria that they have determined is necessary to meet, private mortgages are looking to certain criteria to mitigate risk, however, these lenders will be able to overlook credit issues.
Private lenders will base their calculations predominantly on the appraised value of your property. These lenders will not lend out more than 75% of your property’s current value, which is referred to as a 75% Loan-To-Value (LTV). A private lender will also prefer to see 25% existing equity in your home.
A loan with a higher than 75% LTV is deemed high-risk for a private lender. The job of a private lender is to try to mitigate risk while providing short-term financing for those that may have been turned away from the banks due to credit issues/debts.
Private mortgage loans are structured differently than long-term amortized mortgages offered by most banks in two major respects:
- Private loans are negotiated quickly, and the process is straightforward. – With a private lender, the loan process is simple and will be finalized quickly.
- Private mortgage financing is on a short-term basis – When a borrower is approaching a bank, a bank will lend out, for the most part, long-term amortized mortgage options. With a private lender, most private secured loans will be structured as short-term mortgage loans (usually between 1-3 years.)
- There are different private loan options – Depending on your financial objectives, private lenders can offer both existing homeowners and borrowers a variety of loan options including Debt consolidation loans, Home renovation loans, Home Equity Line of Credit (HELOC), Home Equity loans, Primary mortgage
What types of fees and Mortgage Rates are associated with private mortgages? The banks continue to be in the position of offering very low interest rates. It is important to keep in mind that the banks can do so because they are basing their loan calculations on demonstrated exceptional credit, substantial income, and low debt levels for borrowers.
A private mortgage lender will attach an interest rate of between 7% to 12% depending on the borrowers/homeowners’ overall financial picture. It is always important to continually take any steps to improve your credit standing as interest rates for all lenders (including private lenders to a certain extent) are affected by creditworthiness. The Fees that most private lenders will charge on private loans tend to range between 3% to 6% of the total cost of the mortgage loan.
Steps To Take When Preparing for Private Mortgage Financing
Preparation is the key to obtaining the best terms for mortgage financing. When banks are not an option and borrowers/homeowners are seeking private mortgage financing, it is imperative to research what opportunities are in your area. It is also important to have clear objectives in mind when seeking a private secured mortgage option. Recommended steps to take before meeting with a private lender can include:
- Obtain a recent appraisal of your property if you are looking for a second mortgage loan option.
- Be clear on your mortgage loan objectives (are you looking for funds to renovate, consolidate debts or maybe buy an additional property)
- Research good pre-approval rates.
- Gather all paperwork necessary including proof of income, investment statements, and proof of assets.
- Know your credit score and try to increase your credit score before seeking pre-approval.
- Become very familiar with what is in your credit report and take the necessary steps to improve credit on an ongoing basis.
Mortgage Broker Store Will Help Direct You Towards Private Mortgage Options
If you are a Burlington homeowner or a borrower that would like to obtain mortgage financing, don’t let credit issues stand in your way of purchasing a home or taking out hard-earned equity from your property to pay for needed expenses.
Mortgage Broker Store has access to a broad network of private lenders in the Burlington area. A private lender will be able to sit down with you and discuss your options directly which will help you achieve your mortgage goals.
At Mortgage Broker Store we are in a position to look at your unique financial circumstances and advise as to the best private loan options and lenders that will be able to handle your financial objectives directly.