Several things make Woodstock a favorable place to call home. With a beautiful setting, on the Thames River and many outdoor activities to offer its residents, the city remains a desirable place to live. As of the latest 2016 Canadian census, Woodstock has approximately 40,902 residents and the city is very accessible to larger urban centers including Toronto which is 128 km, and London which is only 43 km away.
Recent real estate figures help to confirm the appeal of Woodstock. According to the May Housing Report for the region, the average house price has risen to a high of $450,000 which represents a 28.4% increase in the first quarter of 2021. The year-over-year increase in both housing sales in the Woodstock area and the average house price has been in the double digits as well, despite the potential financial implications of a drawn-out pandemic.
Private Mortgage Loan Options for Those with Poor Credit
Different factors have converged over the last 16 months that have given significant momentum to the Ontario housing market, even though we have been forced indoors with repeated stay-at-home orders and lockdown.
With historically low mortgage rates on both variable and fixed mortgages, low inventory of available houses on the market, and a race to lock in mortgages before the Government announced an increase in mortgage stress tests, the housing market has been in overdrive.
Many may be seeking secured mortgage financing. While there are plenty of lending opportunities available in Ontario and the Woodstock region, it may be more difficult to obtain a secured mortgage loan if you have damaged credit and a high debt ratio (multiple monthly debt payments to cover.)
Are there options open for those that suffer from poor credit and may have multiple outstanding debts?
Throughout Ontario, there are various secured mortgage loan options available for those that have damaged credit and would like to take out a primary mortgage or second mortgage for an existing homeowner. These loans are offered by Ontario-based private lenders. Some of the private lending options include:
- Home equity loans
- Home Equity Lines of Credit (HELOC)
- Home Renovation Loans
- Bridge financing
- Debt consolidation loans
- Renegotiated terms on a principal (1st mortgage)
How will a private lender be able to help? When contemplating any of these loan options, a private lender will be assessing several key variables. Private lenders will be looking primarily at the appraised value of your home. Your home is what a private lender will be using as the principal collateral for the mortgage loan. For those who require a principal mortgage then a sufficient down payment will be required to offset poor credit and/or high debt ratio. Other criteria that private lenders will be assessing include:
- The overall degree of equity existing in your property.
- Additional assets that can be demonstrated to determine the mortgage amount.
- Overall debt ratio (compared to overall household income)
- All sources of income including self-employed, freelance, and contract-based income
When negotiating a private mortgage loan, a private lender will typically assign an interest rate of between 7% to 12% depending on the type of loan that is being negotiated and the unique financial capabilities of a borrower. Fees associated with most private loans tend to range between 3% to 6% of the loan’s total cost.
As a general rule, private 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.
Steps To Take When Preparing for Private Mortgage Financing
The age-old adage that opportunity is simply preparation meeting the right timing. The same principle applies to the opportunity to take out private mortgage financing. The more you undertake to research the private lending options and be very secure in what you are hoping to achieve financially, the better the private lending process will proceed. Several key steps are highly recommended before meeting with a private lender to go over lending options:
- Research good pre-approval rates.
- Gather all paperwork necessary including proof of income, investment statements, and proof of assets.
- 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)
- Know your credit score and try to increase your credit score before seeking pre-approval
- Be in contact with a mortgage broker for direction
Regardless of the type of loan that you may be considering, a private lender will be able to sit down with you and using a recent appraisal of your property look at different financing avenues that best suit your unique financial circumstances. Private loans have some distinct advantages for a Woodstock homeowner/borrower:
- Private loans are negotiated quickly, and the process is straightforward. To obtain financing for immediate expenses freeing up funds through existing equity or to help make a payment towards a principal mortgage as well as other financial goals, a private lender can provide secured mortgage loans faster than the banks/credit union. The loan process is simple and will be finalized quickly.
- Private mortgage financing is on a short-term basis- Most private loans are structured as short-term loans (typically between 1-3 years). This time will provide the opportunity to restore credit and prove a reliable payment history. By paying the mortgage payments on time and in full for the course of the loan, your credit score will improve.
Mortgage Broker Store Will Help Direct You Towards Private Mortgage Options
If you are a Woodstock 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 Woodstock 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.
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.