With soaring house prices in Ontario, more homeowners are looking to take advantage of the market. Many are considering additional mortgages to invest in rental properties, pay off existing debt, refinance principal mortgages, or renovate homes for resale in this robust real estate sector. Understanding the different types of lenders available can help you make informed decisions and find the best mortgage solution for your needs.
What Lenders Are Available for Ontario Homeowners?
In Ontario, there exists a wide range of potential lenders who can help you secure mortgage loans. Many think of the banks (classified in the industry as A lenders) as the only alternative when seeking mortgage financing. While banks offer the best interest rates, they usually finance long-term (25-30 year) first mortgages (principal mortgages). These loans are deemed low-risk mortgage loans by the banks.
Other types of lenders operate in Ontario. These lenders are classified as B and C lenders. Examples of B lenders are credit unions and trust companies. C lenders represent private lenders, both independent and mortgage brokerages, with lenders specializing in private lending.
- A Lenders- Banks and large lenders. These lenders tend to require quite stringent criteria to qualify for a mortgage loan. Based on recent tightened stress tests, bank criteria now include near-perfect credit scores and preference for full-time salaried employment. Banks can offer very competitive interest rates. The lowest rates fall under 0.2% on some mortgage arrangements. Fees tend to be lower than other lenders. The bulk of the mortgage loans offered by the banks represent amortized long-term 25 to 30-year mortgage loans (principal mortgages).
- B Lenders– Credit unions and trust companies. These lenders also have strict criteria, but they are more flexible than banks. They can work with credit scores as low as 550 and may accommodate self-employed or contracted workers. Interest rates are higher than those offered by A lenders but lower than those of C lenders.
- C Lenders– These lenders are private lenders that may lend individually, as a group of lenders or mortgage brokers that specialize in private lending of mortgage loans. Credit can be overlooked, and these lenders will rely on current appraisals of your property and its location. Due to damaged credit, interest rates associated with private mortgage loans are higher than those offered by banks. Interest rates on mortgage loans range from 8% to 12%, with fees typically between 2% and 4% of the total.
Loan-to-Value Ratio
Private lenders will assess the Loan-to-Value (LTV) on your current property and will assess LTV based on a recent appraisal of your property. Most private lenders will lend out up to 75% LTV (which represents 75% of the appraised value of your home). Private lenders will also look for 25% existing equity in your home to leverage the loan against.
As more and more Ontario homeowners are looking for mortgage financing either for their principal property or for another investment/rental property, Ontario-based lenders are offering different mortgage solutions.
Ontario homeowners facing credit difficulties or uncertain income can quickly get approved for loans through private lenders (C lenders). Private lenders will need a recent home appraisal, a list of assets, all sources of income, and home equity details for processing a private mortgage.
Current Ontario Stats
According to the figures recently released by the Ontario Real Estate Association (OREA), the average price of a resale residential home in Ontario is $890,634 and has decreased by 3.7% from this time last year in May 2023.
According to the Ontario Real Estate Association, residential sales activity reported through the Multiple Listing Service (MLS) in Ontario numbered 17,871 units in May 2024 which represents an decrease of 16.3% when compared to house sales the same time last year.
Now is a great time to apply for mortgage financing. Like many things in life, timing is everything. This principle applies to the Ontario housing sector.
This week, the Co CEO of Ratehub reported the first Bank of Canada rate cut since 2020 at 4.75%. James Laird reports, “We’re now in a new phase of Bank of Canada rate policy, where the banks are going to get the rate down to a level that they think the economy can function at, and that is not restrictive to economic growth”.
Let Mortgage Broker Store Help Secure a Private Mortgage Loan
Mortgage Broker Store is well experienced in the specifics of applying for a private mortgage loan and has access to a wide network of Ontario-based private lenders who will be able to negotiate the terms of a private mortgage loan that best suit your financial circumstances. Feel free to contact us with any concerns, and we can connect you with a private lender in your area. Take advantage of your home equity to meet today’s needs and future financial obligations. Email ron@mortgagebrokerstore.com or call 416-499-2122.
