When faced with sudden financial challenges, a second mortgage can help you access money fast by using the equity in your home without changing your primary mortgage. A private mortgage allows you to access cash when a bank may turn you down for reasons such as having a poor credit history or you are self employed. More Toronto residents are also relying on alternative forms of income, making it harder to get approval for mortgages and loans from traditional banks.
Types of Private Mortgage Lenders
Private mortgage lenders provide a short term secured loan that usually runs between one and three years. There is no requirement to pay back the principle amount, instead the monthly repayments cover the interest with the principle attached at the end of the term.
- Individuals who can lend out of personal funds with interest
- Syndicate or a group of investors who have pooled their money and provide funds on a case-by-case basis
- Mortgage Investment Company who will providing funding for more than one person
Private Money Lenders vs Banks
Private money lenders are different from banks in many ways. Private lenders consider several factors when evaluating a potential loan.
Equity – Private lenders will evaluate the value of the property being used to secure the loan. This is done by looking at the Loan-to-Value ratio or (LTV). The LTV for a property is equal to all mortgages on a property divided by the appraisal value of the property. If you own a home worth $1,000,000 and get a new first mortgage for $750,000 then your LTV ratio is 75% (i.e., 750,000/1,000,000). Most banks and other A-Tier Lenders can loan up to 95% LTV provided that the borrower has a good income and credit score. Most non-bank lenders can lend up to 75% LTV but can overlook income and credit issues.
Income – It can be difficult to get a loan from a bank if you don’t have traditional employment. These days most people don’t work ‘9-to-5’ but still have the necessary funds to pay back a loan. A private money lender will look at your overall income based on the average income of your type of employment to determine your eligibility.
Why Would You Use A Private Mortgage Lender?
Private mortgage lenders allow you greater flexibility for investing in property or making improvements to your home. Banks often require a greater amount of time to approve a loan while private mortgage lenders can usually make approval decisions within a week. So why choose a private mortgage lender?
- You need money fast and don’t have time to go through a lengthy approval process.
- You have bad credit and a bank or conventional lending institution will not approve a loan.
- You only need the money for a short term such as a home repair or personal emergency.
- You are purchasing a non-traditional property that is not usually covered by a bank or other institutional lender.
- You want to consolidate your debt.
- To pay off high-interest credit card debt
- To cover living expenses after a work layoff
- To stop a power of sale or foreclosure
- To pay tuition fees for college or university
Fees Associated with a Private Mortgage Loan
The fees associated with a private mortgage can vary by lender. Most mortgage rates will run from 7 to 12% depending on the eligibility factors. The combined lender and broker fee will be 3% to 6% depending on the complexity of the mortgage request.
A reverse mortgage rate will be a little bit less in the 4.75% to 6% range.
When budgeting for your private loan, it is important to also take into consideration other fees such as:
- Legal Fees
- Land Transfer Taxes
- Real Estate Fees
- Broker and Lending Fees
- Private Mortgage Insurance
Specialties Of Private Mortgage Lenders
- The Canadian Home Income Plan, commonly known as CHIP, is offered through HomeEquity Bank. A CHIP Reverse mortgage allows homeowners, aged 55 and over to access up to 55% of their homes value.
- The PATH home loan is offered by Equitable Bank. A PATH loan helps buyers with low-to-moderate incomes or alternate sources of income qualify for mortgages
With either of these options, you can arrange the loan directly with a bank or via a mortgage broker. A mortgage broker can also help you explore other financing options, such as lines of credit, that may better fit your needs.
Private First and Second Mortgages – A first mortgage puts a first lien position on the property that is secured by the mortgage. Private mortgages are ideal for people who want to borrow money for immediate expenses and not be saddled with a long-term loan. Most private mortgages range from 1 to 3 years. A second mortgage is conjunction with a first mortgage and puts a second lien on the property. A second mortgage can be a great tool for consolidating debt, funding home renovations, or act as a bridge loan.
Home Equity Loans – A home equity loan is a kind of loan secured by a piece of real estate. These loans are usually given as registered mortgages on a property and approval is based on the equity in the property. Equity is the value of a home minus the debts on it. Home equity loans are different from bank loans, which are approved based on credit score. Our team of experts have years of experience providing home equity loans in Toronto.
Debt Consolidation Loans – Debt consolidation is the process of refinancing a person’s debt by using one large loan to pay off many small loans. Typically, is done to get a lower overall interest rate, to reduce other miscellaneous fees associated with the individual debts, and for the convenience of making a single payment instead of many payments.
Getting Private Mortgage Loans in Ontario
A private mortgage loan can help you achieve your financial goals quickly and without a lot of hassle.
Major banks in Ontario have extensive and time-consuming loan approval processes. If you need money fast, you may be left waiting. Private lenders can provide mortgage money much faster than banks can, oftentimes in as little as one day if necessary.
Private lenders use the LTV ratio to determine the existing market value of the home. For example, a house with a market value of $1,000,000 and $800,000 in existing mortgages will have an LTV of 80%. Most private money lenders in Ontario will not invest in residential properties with an LTV of greater than 80%. Use our LTV Calculator below more information.
Need Help Deciding if a Private Mortgage is Right For You?
We understand that the world of private lending can be confusing. We are experts in arranging mortgages in Ontario and can answer all your questions. Get some free advice with absolutely no costs or obligations.
A Loan-to-Value ratio for a property is equal to all mortgages on a property divided by the appraisal value of the property. If you own a home worth $1,000,000 and get a new first mortgage for $750,000 then your LTV ratio is 75% (i.e., 750,000/1,000,000)
Most banks and other A-Tier Lenders can loan up to 95% LTV provided that the borrower has a good income and credit score. Most non-bank lenders can lend up to 75% LTV but can overlook income and credit issues.
The lender will then look at income to determine eligibility and ensure repayment can be made. Finally a lender will look at your credit score to evaluate your ability to meet your financial obligations.
If the borrower defaults on their mortgage, forcing the lender to sell the home to recoup the costs, the primary mortgage lender is paid back first. The higher a property’s LTV, the less likely it is for the private lender to be able to recoup their losses if the borrower defaults.
Private mortgages are one of the best options for people who want money fast without the assistance of a bank. No matter what kind of credit history you have or the reason you need the money, we can provide the guidance and knowledge to help you secure the money you need at a rate you can afford.
We Have Private Lenders in Cities & Towns Across Ontario Including
- Private Lenders in Ajax
- Private Lenders in Aurora
- Private Lenders in Barrie
- Private Lenders in Belleville
- Private Lenders in Bolton
- Private Lenders in Bradford
- Private Lenders in Brampton
- Private Lenders in Brant
- Private Lenders in Brantford
- Private Lenders in Brockville
- Private Lenders in Burlington
- Private Lenders in Caledon
- Private Lenders in Cambridge
- Private Lenders in Cobourg
- Private Lenders in Cornwall
- Private Lenders in Etobicoke
- Private Lenders in Fort Erie
- Private Lenders in Georgina
- Private Lenders in Guelph
- Private Lenders in Halton Hills
- Private Lenders in Hamilton
- Private Lenders in Innisfil
- Private Lenders in Kingston
- Private Lenders in Kitchener
- Private Lenders in London
- Private Lenders in Markham
- Private Lenders in Milton
- Private Lenders in Mississauga
- Private Lenders in Newmarket
- Private Lenders in Niagara Falls
- Private Lenders in North Bay
- Private Lenders in North York
- Private Lenders in Oakville
- Private Lenders in Ontario
- Private Lenders in Orillia
- Private Lenders in Oshawa
- Private Lenders in Ottawa
- Private Lenders in Peterborough
- Private Lenders in Port Hope
- Private Lenders in Pickering
- Private Lenders in Richmond Hill
- Private Lenders in Sarnia
- Private Lenders in Sault Ste. Marie
- Private Lenders in Scarborough
- Private Lenders in St. Catharines
- Private Lenders in St. Thomas
- Private Lenders in Stouffville
- Private Lenders in Stratford
- Private Lenders in Sudbury
- Private Lenders in Toronto
- Private Lenders in Thornhill
- Private Lenders in Thunder Bay
- Private Lenders in Timmins
- Private Lenders in Trenton
- Private Lenders in Unionville
- Private Lenders in Uxbridge
- Private Lenders in Vaughan
- Private Lenders in Waterloo
- Private Lenders in Welland
- Private Lenders in Whitby
- Private Lenders in Windsor
- Private Lenders in Woodbridge