Like many mid-size cities dotted throughout Ontario, Windsor is a great place to live. With easy access to the US border, a host of outdoor amenities, and an array of attractions, including a waterfront park stretching along the Detroit River, Windsor has much to offer its residents. As of the 2017 population census, Windsor is home to 233,763 residents.
Real estate in Windsor has benefited from the steep appreciation and hike in housing sales that have occurred across the Province during the last year. Despite the prolonged pandemic, the Windsor housing sector has only seen gains. According to the Windsor-Essex County Association of Realtors, March 2021 saw 700 homes sold which represents a 38.89% increase from the same time last year.
New Windsor listings are up over 11% from the same month last year as well. In Windsor, the average home price now stands at 531,805 dollars which represents a substantial gain of 49.41% from last year’s average house price.
Lending Options for Windsor Homeowners and Borrowers
With astonishing numbers like this, many may be interested in either taking out the first mortgage to buy into the robust housing market or take out equity from their homes in the form of a second mortgage. Regardless of the reasons behind seeking mortgage financing, there exist different lending options for the Windsor borrower/homeowner.
Mortgage professionals tend to classify types of lenders into three broad categories:
- A Lenders– These lenders are banks who require borrowers to pass stringent mortgage stress tests, expect exemplary credit scores and traditional yearly full-time income to approve mortgage financing.
- B Lenders- These lenders are made up of credit unions and trust companies who may be less rigorous in their mortgage criteria expectations, however still expect strong credit and yearly easily demonstrated income.
- C Lenders– These lenders are private lenders who may lend out private secured mortgage loans individually, part of a group of private lenders, and include mortgage brokers who specialize in lending private mortgage financing.
Lending options open to Windsor borrowers relate strongly to the degree of creditworthiness and the types/amount of household income of the borrower. There are different reasons to take out secured mortgage options:
- Home Equity Line of Credit (HELOC)– This represents a revolving line of credit and can be used as needed. The equity that exists in your home will be used in a HELOC
- Home Equity Loan- Just as in a HELOC, a home equity loan will utilize the existing equity in your home. Instead of accessing the funds when needed and paying the interest on the loan, monthly payments are made on a home equity loan. Private lenders will determine the existing equity built in your home (usually requiring 25% equity) and calculate LTV (private lenders will comfortably lend up to 75% LTV, which is 75% of the appraised value of your home).
- Home renovation loans– By utilizing existing equity in your home a home renovation loan can be negotiated using your home as leverage for the loan. You can put these funds towards renovations and fixes that will further increase your home’s market value and increase your enjoyment while living in your property.
- Bridge financing -If you are requiring short-term financing for different reasons private bridge financing can help bridge the gap. Similar to most private loans, it is negotiated on a short-term basis. Most private loans are of term lengths between 1- 3 years.
- Negotiating new terms on your principal loan– Renegotiating some of the terms of your current primary mortgage can ease the financial strain and help to ensure mortgage payments do not fall into arrears.
- Second Mortgage– Using existing equity in your home and assessing the loan to value (LTV) a private lender will be able to negotiate an additional mortgage on your home freeing up funds to pay for immediate expenses or to maybe invest in a second property in the robust Windsor housing market.
- Debt consolidation loans– If managing multiple debt payments are straining the household budget, private debt consolidation loans can help roll these payments into one monthly debt payment. Debt consolidation loans can help increase your credit score if you make the payments in full and on time each month.
What Criteria are Private lenders Looking for?
When you have made the decision to meet with a private lender, he/she will be assessing the Loan-To-Value (LTV), assessing the most recent appraisal on your property, and looking at how much equity exists in your home. Generally, a private lender will prefer to see at least 25% equity built in your home.
As a rule of thumb, a private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). If your home is worth 400,000 dollars, then a private lender will not lend more than 300,000 which is 75% of the total value of your home. Credit and salary will also come into play but will not stand in the way of private mortgage financing, unlike the banks and credit unions who rely heavily on credit scores and creditworthiness.
The Interest rates charged by private lenders tend to be higher than the banks routinely change. Banks can afford to do this because mortgage loan approval depends heavily on near-perfect credit and easily demonstrated/substantial household income. If your credit is poor, private loans are available to provide short-term mortgage financing. Interest rates will be between 7% to 12% with any associated fees ranging between 3% to 6% of the final cost of the loan.
- Research private lending options in your area
- Arrange to sit down with a private lender
- Know what type of loan you feel would address your short term financial needs
- Gather all relevant paperwork
- Bring a recent appraisal and proof of the degree of equity in your home
- Consider a pre-approval if you are applying for a principal mortgage
- Be very familiar with your credit score and credit report
As a general rule, you should also do what you can do to improve your credit score. Try to pay down high-interest debt if you can. Make an effort to always pay any liability payment on time and in full if possible. The better your credit ultimately will give you the most favorable terms on your final secured mortgage agreement.
Mortgage Broker Store Can Direct you towards Suitable Private Mortgage Options
At Mortgage Broker Store we have access to a network of established Windsor-based private lenders. We can determine the type of mortgage financing that will suit your financial objectives. We will be able to point you in the direction of a private lender to help negotiate terms on a secure mortgage loan option.
Poor credit does not have to stand in the way of securing mortgage loans. Whether you are seeking a first mortgage to purchase a home or would like to tap into the existing equity in your home, private lending options are available to help make these mortgage goals achievable.