As Ontario’s real estate market soars, Burlington is not to be overlooked with a remarkable double-digit property value increase year-over-year. This housing market offers abundant opportunities for homeowners to unlock their property’s growing equity. Well, what if someone’s credit isn’t in good standing? That’s where private mortgage lenders come into play. Unlike traditional lenders, they can offer loans to those with poor credit scores. In this article, we’ll look deeper into private mortgage lenders in Burlington and focus on why they might be a better alternative for some borrowers.
Burlington: A City Profile
Burlington, home to approximately 206,000 people and located on the western fringe of the Greater Toronto Area, has many parks, urban amenities, and its proximity to Lake Ontario. With the housing market, locals may access significant property equity by purchasing a home. However, traditional lending routes can be restrictive, particularly for those with poor credit or unconventional income sources. Private mortgage lenders offer a flexible alternative, filling a crucial gap in the lending landscape of this thriving city.
Mortgages from Private Lenders: A Flexible Alternative
When seeking mortgage financing in Burlington, one typically has three tiers of lenders to consider:
- A Lenders- Banks represent this category of lenders. Mortgage approval can be quite rigorous. Lenders routinely subject applicants to tough mortgage stress tests to determine eligibility. Tighter mortgage stress rules as of June 1, 2021, have increased the difficulty of obtaining mortgage financing. Banks also prefer to use easy-to-calculate, substantial household income when approving mortgage loan parameters.
- B lenders- Credit unions and trust companies comprise this category of lenders. While not quite as stringent as the banks when determining mortgage loan approval, these lenders still expect to see a credit score of at least 550 and above and prefer traditional, substantial yearly household income.
- C Lenders- Private lenders make up the final category of lenders. Private lenders are often sought after by borrowers with poor credit, as they can look beyond credit scores by assessing other criteria. This criterion is primarily determined by the appraised value of your home, the calculated Loan-to-Value (LTV) Ratio of your loan application, and, for homeowners, how much home equity they have. The LTV ratio is the percentage of the property’s value owed in mortgages. Start with all existing mortgages plus all proposed mortgages, then divide by the appraisal value. If a homeowner has a home worth $1,000,000 with a $500,000 first mortgage and is requesting a $250,000 second mortgage, the LTV ratio for the requested mortgage can be up to 75% of the property’s value.
Private Mortgage Lenders in Burlington
Traditional financial institutions like banks subject borrowers to rigorous mortgage stress tests and demand credit scores upwards of 600. Similarly, B lenders still require a minimum credit score of 550 and are generally more amenable to applicants with conventional and easily verifiable incomes. These rigid requirements often make mortgage approval difficult for many Burlington homeowners.
Private mortgage lenders, on the other hand, offer a more flexible pathway to securing a loan. Unlike traditional lenders, they can work with borrowers with poor credit or unconventional income streams. Private lenders focus on the Loan-to-Value (LTV) ratio and the existing equity in the home, providing tailored short-term mortgage options that can assist in debt alleviation. An example of an LTV ratio for a property with a $500,000 first mortgage is requesting a $250,000 second with an appraisal value of $1,000,000.
(500,000+250,000)/1,000,000 = 75%
This willingness to negotiate based on property equity allows homeowners with impaired credit to access urgent funds without the hurdles they would encounter at traditional financial institutions.
Private mortgage lenders are a more accessible and quicker option for homeowners in Burlington because they offer customized loan agreements and a more inclusive assessment of a borrower’s financial circumstances.
Approval Criteria for Private Mortgages in Burlington
In contrast to conventional banks, private mortgage lenders in Burlington have a distinct set of criteria when approving loans. These lenders prioritize the property’s appraised value, location, and renovation impact over credit scores. As mentioned earlier, one key metric used in their evaluations is the Loan-to-Value (LTV) ratio.
Private lenders in Burlington generally limit their loans to an LTV ratio of 75%, offering loans up to 75% of a property’s appraised value. This ceiling provides a safeguard against market volatility and other associated risks. While credit scores aren’t central, private lenders avoid properties with high debt levels due to repayment risks.
Some private lenders consider the property’s location in Burlington and any renovations that increased its appraised value. For example, homes closer to key amenities or those that have undergone significant improvements might find more favourable loan terms.
Reasons for Needing a Private Mortgage in Burlington
Private lenders are lenient and often only require the reason for the loan for record-keeping. Some typical reasons among the residents and businesses in Burlington include:
- Paying off high interest credit card debt
- Financing university or college tuition
- Funding home repairs or renovations
- Stopping a power of sale or foreclosure
- Managing living expenses after job loss
Private lenders accommodate borrowers rejected by banks, regardless of reasons or financial status, providing an alternative avenue for financing.
Faster Financing
Private lenders in Burlington offer unmatched speed and agility, outpacing traditional banks in the fast-paced real estate market. Swift financing is crucial for preventing a power of sale or seizing time-sensitive investment opportunities.
Private lenders in Burlington stand out for their speedy approval and disbursement processes, setting them apart in the industry. Due to their meticulous credit checks and bureaucratic procedures, traditional banks can process a mortgage application for weeks. In stark contrast, private lenders in Burlington often complete the entire process within a matter of days. Their focus on property value and debt ratio, not extensive credit checks, enables swift funding approval.
Quick funding can be a game-changer amid fierce competition in Burlington’s bustling real estate scene. Private lenders’ speed is crucial for securing dream homes or meeting urgent financial needs, often making a decisive difference.
Impact and Future of Private Mortgage Lending in Burlington
Burlington’s growth sparks new investment avenues; private mortgage lenders emerge as key catalysts in development. Their impact on Burlington’s finances mirrors trends in Ontario, known for year-over-year property value increases, bolstering local prosperity. The city offers an excellent quality of life and accessibility to Toronto, which has led to an average house price of $1.2 million and an impressively quick average sale time of 14 days.
Local brokers excel in private mortgages for residential and commercial properties, catering to diverse client needs. These experts provide tailored services, deep local market insight, and extensive industry expertise to meet Burlington’s needs.
- Introduction
- Burlington: A City Profile
- Mortgages from Private Lenders: A Flexible Alternative
- Private Mortgage Lenders in Burlington
- Approval Criteria for Private Mortgages in Burlington
- Reasons for Needing a Private Mortgage in Burlington
- Faster Financing
- Impact and Future of Private Mortgage Lending in Burlington