Bradford holds many positives for a potential homebuyer. With access to a wide range of outdoor activities, local amenities, and first-rate schools, residents of Bradford can retain a relaxed lifestyle. Located on the banks of the Holland River, Bradford is still within an easy commute of the GTA and central Toronto.
With a population of roughly 24,000, Bradford offers the best of both worlds. A small-town community feel, with all the amenities within a short distance that a larger metropolis can provide. New housing developments in the Bradford area are indicative of the draw that the area has for many potential homeowners.
Bradford has reflected other areas of the Province in the degree of property appreciation throughout 2020 and into the second half of 2021. Appreciation has been in the double digits. Bidding wars for limited housing inventory have resulted in offers that are well above the asking price on Bradford properties.
The latest real estate numbers reported from the Bradford July Housing Report continue to impress. The average house price of a single detached Bradford property has increased to $1 million. This represents a 30.1% year-over-year increase since July 2020.
With such a robust Ontario housing market it can be a good time to consider taking out a second mortgage on an existing property. With such marked property appreciation, tapping into existing equity can help to solve short-term financial issues.
Perhaps you are looking to consolidate all monthly debt payments into one, lower-interest payment (compared to astronomical rates charged by most credit cards.). A homeowner could also need money to address long-overdue home improvements that were put on the back burner during the height of the pandemic.
Whatever the direct financial need, being approved for any refinancing requires certain criteria. Most Ontario-based lenders will be expecting very strong credit scores and substantial household income. Any additional financial assets would also prove beneficial when seeing mortgage approval for most lenders.
Although the banks and most credit unions/trust companies do rely on creditworthiness and traditional, easy-to-calculate yearly household income, well-established private lenders are widely available in Ontario for those that have damaged credit.
Private lenders will be able to take other criteria beyond credit to negotiate second mortgage options. Private lenders will base loan eligibility on:
- A recent appraisal of your property– As a second mortgage loan will be leveraged against your home, the appraised value is paramount in any private loan calculations.
- The Degree of Equity in your property- Private lenders will be assessing the degree of equity in your home and this equity (as compared to what is still outstanding on your first mortgage) will be used to determine the terms and amount of a second mortgage loan.
- Take into consideration all sources of monthly income- Unlike their bank counterparts, all sources of monthly income will be considered by private lenders including freelance, contract-based, investment, and self-employed.
- Any additional financial assets- Any assets beyond your home can be used to help leverage the loan against and will be considered by private lenders when negotiating loan terms.
What Criteria Do Bradford Private Lenders Use When Structuring Private Mortgage Financing?
By being able to look beyond poor credit, private lenders can structure a second mortgage loan option based on several key criteria:
- The Loan-To-Value (LTV)- When private lenders are structuring private secured mortgage loans, they will calculate the LTV which is directly based on the current appraised value of your property. A private second mortgage loan is deemed to be a higher risk loan so a private lender will not loan beyond 75% LTV which represents 75% of the appraised value of your home in relation to what is still remaining on your first mortgage.
- Overall Debt Ratio- It is best to try to pay down any higher interest debt and to keep a lower debt ratio. A private lender will take into consideration the overall household debt ratio and will be able to loan despite a higher debt ratio than what the banks will allow for additional mortgage financing.
- Appraised Value of your property- Bring a recent appraisal with you to any meeting with a private lender. This appraisal will form the basis of the loan calculations and the eventual terms of the mortgage loan.
- Overall condition of your property- A private lender is using your house as collateral for the loan and therefore he/she will be assessing the overall condition of your property. Is there any water damage? Any issues with mold? Issues with the foundation?
- Location of your property- As is the case with all real estate transactions, the location of your property is very important. Location! Location! Location!
What Types of Private Loan Options Are There?
- Home renovation loans– By utilizing the equity in a property, a home renovation will provide funds to cover any pressing renovation or fix-ups needed on the property. By investing in equity to take care of renovation, the value of the property will ultimately increase.
- Home Equity Line of Credit (HELOC)- This is a revolving line of credit leveraged against your home using existing equity. A homeowner can draw on the funds when required and is only responsible for making interest payments.
- Home Equity Loan- A home equity home also taps into a homeowner’s existing equity but in one negotiated lump sum with monthly payments made on the home loan.
- Bridge financing- Home equity can also provide funds to pay for short-term financing goals. Bridge loans tend to be negotiated for between 3- 6 months terms.
- Help to put the first mortgage back in good standing- By accessing equity in your home in the form of a second mortgage a homeowner can help to pay off any outstanding arrears or associated legal fees if it is under power of sale. Funds will be available to help pay monthly housing costs associated with a homeowner’s first mortgage.
- Debt consolidation loans– A private debt consolidation loan will enable a Bradford homeowner to merge all debt payments (liabilities) into one manageable monthly debt payment. This will help to restore credit if the payment is reliably made on time every month.
With historically low mortgage rates, the banks are in the position to offer very competitive rates on most mortgage options. They are able to do so because they are basing financing on borrowers with exemplary credit, substantial household income, and low debt ratios. In other words, these loans are deemed to be lower-risk mortgage loans.
When negotiating terms on private loans for those with poor credit interest rates will be higher. Poor credit loans are considered higher-risk loans. Generally, private lenders will charge between 7% to 12% depending on the unique financial picture of the homeowner. Fees will tend to be between 3% to 6% of the total cost of the loan.
Mortgage Brokers Store Can Point You in the Direction of Private Mortgage Financing
With specialized knowledge in the realm of private lending, Mortgage Broker Store will be able to advise a Bradford homeowner/borrower on suitable mortgage options. With access to a broad network of private lenders based in the Bradford area, we will be able to connect you with a private lender who can negotiate a variety of loan options based on a borrower/homeowner’s particular financial criteria.