Throughout 2020 and continuing through the third quarter of 2021, many areas throughout Ontario saw substantial housing appreciation and high turnover of limited housing inventory. Ajax is no exception.
Located to the East of central Toronto but within comfortable commuting distance, Ajax is home to 121,780 as of the last population census in 2016. In the Durham region of Southern Ontario, Ajax sits adjacent to Lake Ontario. Providing an enviable backdrop for those that call Ajax home, residents have access to good schools, a host of local amenities and are able to take advantage of the relatively close proximity to downtown Toronto.
Housing statistics reflect the enviable position that the town of Ajax is in. According to the September Ajax housing report, the average house price has risen to $931,000 for a single three-bedroom detached residence. This represents a 23% year-over-year increase. Houses continue to sell quickly with an average of only 9 days on the market from listing to selling.
These numbers have encouraged some Ajax homeowners to look into the option of taking out a second mortgage on their property by tapping into existing equity. If an Ajax homeowner has strong credit and substantial household income, there are plenty of second mortgage options available through Ajax-based lenders.
Types of Lenders
When making an important decision regarding the equity in your home it is valuable to have a clear understanding of the lending options that exist. The mortgage industry has further classified the high number of lending options into three broad categories based primarily on:
- Degree of household income
- Ability to pass mortgage stress tests
- Any additional financial assets to use as further leverage on a mortgage loan
The three classifications of lenders fall are categorized as:
- A lenders– Banks are classified as A lenders in the mortgage industry. Banks require homeowners/borrowers to demonstrate high credit scores and easy-to-calculate monthly salaries. Borrowers are put through mortgage stress tests to determine mortgage eligibility. These mortgage stress tests increased in rigor on June 01, 2021, with the implications of new mortgage rules. Currently, Banks will expect a minimum credit score of 600
- B lenders- Credit Unions/Trust companies are classified as B lenders. These lenders have slightly less stringent mortgage criteria. Borrowers must, however, present with credit scores of at least 550, and traditional income is preferred as opposed to contracting or freelance income.
- C lenders– Private lenders are classified as C lenders. Private lenders will base mortgage financing on criteria beyond credit and salary amount and type. The criteria are based on the appraised value of your home, your home’s location, the current condition of your property, and the degree of the existing equity in your home.
Types of Private second mortgage loan options
If credit is an issue, there exist an impressive array of private second mortgage loan options for the Ajax homeowner to consider. The final decision on which loan option to go correlates strongly with Ajax homeowners’ particular financial circumstances and unique financial picture.
Private loan second mortgage options include:
What Is an Ajax Private Lender Basing Mortgage Financing On?
Whenever a private lender is determining the amount of private mortgage financing he/she will look at a number of criteria that relate directly to the specifics of your home. Before a private lender assesses relevant criteria, he/she will forest need to calculate the Loan-To-Value (LTV).
In general, a private lender will lend to a maximum of 75% LTV which is translated as up to 75% of the appraised value of your home. The LTV may be lower for a property in an outlying area with a typical LTV of 65% standard for most private lenders.
Criteria that a private lender will be looking at carefully also include:
- The overall current appraised value of your home- A private lender will be carefully assessing a current appraisal of your home. A homeowner will need to bring an appraisal to an appointment with a private lender. This document is central in calculating the overall terms of a potential second mortgage.
- Your home’s current condition– Any recent renovations and conversely any ongoing potential structural issues such as mold, water damage, or foundation issues.
- The location of your home- As in any real estate transaction, the location of a given property will influence the overall mortgage financing decisions.
- The degree of equity that is existing in your home– Generally a private lender will need to see at least 70,000 in existing equity in order to negotiate second mortgage financing.
Mortgage Loan Rates and Fees Charged By Private Lenders
Although the banks may be able to offer competitive rates, they are able to do so because they are basing mortgage loan financing on strong credit, the ability to pass mortgage stress tests, and substantial straightforward-to-calculate household income.
Private lenders will be charging slightly higher mortgage rates to help mitigate risk with those that have poor credit. Generally, the rates that most private lenders will be charging range from 7% to 12% depending on the Ajax homeowner’s unique financial picture. Fees will typically range between 3% and 6% of the total cost of the mortgage loan.
Mortgage Broker Store Will Help Direct You Towards Private Mortgage Options
If you are an Ajax 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 Ajax 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.
At Mortgage Broker Store 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.