It has not been easy for many homeowners. Rising housing costs, first mortgage payments, and household debt have increased the financial burden on many Ontario homeowners.
Despite a robust housing market, Ontario homeowners have faced significant financial impacts. With job changes and reduced income, Ontario homeowners may have also experienced damaged credit.
Despite poor credit, options remain for taking out a second mortgage using existing equity in your property. If a bank has declined your refinancing options, an Ontario-based private lender can negotiate a short-term private second mortgage loan.
Private Lenders Are Well-Established in Ontario to Help Bridge the Financial Gap
A bank may reject a homeowner due to poor credit, but a private lender can overlook this and base secondary mortgage financing on broader criteria.
Throughout Ontario, private lenders are well-established and experienced in negotiating private secured second (and sometimes third) mortgage options for existing homeowners with poor credit or high household debt ratios.
Several features of private second mortgage loans remain consistent regardless of the refinancing option a homeowner chooses.
- All Privately negotiated mortgage options are structured as short-term only. Typically, a private loan will be 1-3 years in length. This term length provides sufficient time to restore credit if the loan is paid in full and on time every month. By honouring the terms of a short-term private loan, a homeowner’s credit score will increase, which will, in turn, make it easier to obtain other types of refinancing down the road.
- Private mortgage loans are negotiated quickly. The processing time generally takes as little as 1 to 5 days. This represents a faster turnaround time than the one offered by the banks.
- Private second mortgage loans tap into existing equity in your home. Refinancing terms are primarily based on your property’s appraised value and the equity you have in your home.
- Private loans can be negotiated despite poor credit. Unlike the banks, a private lender can look to other criteria beyond credit score when determining mortgage loan eligibility.
Types of Second Mortgage Options
A homeowner’s financial needs will differ. There are also a multitude of reasons for refinancing and looking at the option of a second mortgage on your property. Similar to banks, private lenders can negotiate various second mortgage options based on your financial needs and credit profile.
Private mortgage loan options generally include:
- Home Renovation loans – These can provide the funds necessary for pressing renovations and updates to your property. By renovating and upgrading your property, you will increase its resale value.
- Bridge Financing– Serving as a bridge between financial obligations or providing the necessary short-term funds to meet immediate financial objectives. Bridge loans are typically 3-6 months in length and are structured to provide a temporary financial solution.
- Debt consolidation loans – If you have multiple debt payments, a debt consolidation loan can help merge these payments into one manageable monthly payment. This will enable all associated housing costs to be covered more comfortably.
- Home equity loans – By accessing existing equity, you can address financial concerns like paying off debt, education expenses, or ensuring reliable mortgage payments.
- Home Equity Line of Credit (HELOC) – Acting like a revolving line of credit enabling funds to be available as the balance is paid off, a homeowner only needs to pay the monthly interest on the line of credit.
How Are Poor Credit Loans Negotiated?
When calculating the overall mortgage loan amount and general terms on a private mortgage loan, C lenders (private lenders) will be scrutinizing key criteria that do not rely solely on credit score:
- The Loan-To-Value (LTV) – A private lender will calculate the LTV and will loan up to 75% of the current appraised value of your property. This would equate to 75% LTV.
- Current Appraisal of Your Property – It is imperative that you have a recent appraisal carried out on your home by a recognized and accredited Ontario-based appraiser. Bring this appraisal to any meeting with a private lender. The appraisal is crucial in determining the final loan amount and terms of the private second mortgage.
- Degree of Equity in Your Home – A private lender will be assessing the degree of equity in your home compared to the amount still owing on the first mortgage.
- Additional Financial Assets – Additional financial assets can secure better mortgage loan terms, though not mandatory.
- All Sources of Monthly Household Income – A private lender will take into consideration all sources of monthly income including investment income, freelance, self-employed, or contract-based.
The interest rates on most private second mortgages range from 8% to 12%, depending on the borrower’s financial picture. As with any loan assessment, lower equity and higher household debt result in higher interest rates.
Fees associated with private second mortgages generally fall between 3% and 6% of the total loan cost. Private lenders will lend despite poor credit, but expect higher interest rates and fees due to higher risk.
Mortgage Broker Store Can Negotiate Different Types of Second Mortgage Loan Options
With access to a broad network of well-established and experienced private lenders across Ontario, Mortgage Broker Store can connect an interested homeowner to private lenders to discuss various refinancing options. We will also be able to negotiate private financing directly, depending on your specific financial objectives. Poor credit or non-traditional income should not prevent you from obtaining a bridge loan or any necessary loan. Don’t hesitate to contact us at your convenience to discuss the best options to suit your unique financial circumstances. Call 416-499-2122 or email ron@mortgagebrokerstore.com and gain expert advice!
