The Government of Canada has banks under strict regulations, which unfortunately leave many residents seeking loans out in the cold. Mortgage borrowers who cannot meet the banks’ criteria for loan approval must seek alternative funding only from private mortgage lenders in Caledon. These companies or individuals are not under so much government control, allowing them to service hard-to-place mortgages that the banks rejected. Banks can only issue mortgages to individuals with 600 credit score points or more. People who cannot meet bank loan approval criteria can turn to private lenders for help.
Mortgages from Private Lenders in Caledon
Private mortgage lenders in Caledon, Ontario, will provide funds only in registered mortgages. A registered mortgage means the lender can sell the property used as security if the borrower cannot honour the deal. You can get as little as $20,000 for one year (unless you request otherwise). For riskier second mortgages or loans to people without an income, the lenders charge higher fees than those for bank loans. Private lenders generate income by investing in real estate, and the Caledon market is attractive as it has some of the country’s highest real estate appreciation rates.
Why Might One Need a Private Mortgage?
While applying for a mortgage with a private lender, you will be asked to state why you need the money. Thankfully, private lenders are more lenient than banks, accepting any reasonable response. Some popular ones include:
- To pay off high-interest credit card debt
- To pay tuition fees for college or university
- To stop a power of sale or foreclosure
- To cover living expenses after a work layoff
- To pay for home repairs or renovations
Private lenders target clients who cannot get a low-interest bank loan. Our network of lenders in Caledon can provide mortgages to individuals turned down by banks.
Fast Financing from Private Lenders
The main banks of Ontario must follow a rigorous, time-consuming mortgage approval process, which cannot be expedited. This can be an issue when faced with urgent property sales. The solution is private lenders who can provide funding within 24 hours. Our private lender network can offer loans against real estate in all cities and towns of Ontario.
Costs Involved in A Private Lender Mortgage
Private mortgage lenders are more expensive than any other type of mortgage lender. There are no standard costs, but most lenders try to offer rates and fees that are competitive with other lenders. Here are some costs to expect as of December 2024:
- Interest Rates: Typically between 8% and 12%
- Lender Fees: Usually between 2% and 4%
- Broker Fees: Set to match the lender fees, which are usually 2% to 4%
- Appraisal Fee: $500 + HST for single-family homes in Ontario. Larger or unconventional properties will cost more.
- Legal fees: These range from $1,000 to $3,000, depending on the mortgage request.
How LTV Affects Costs
The Loan-to-Value (LTV) ratio plays a big role in determining your costs. Simply put, the closer your mortgage is to the lender’s maximum allowable LTV (typically 75%), the higher your rates and fees. Lenders see higher LTVs as riskier, so they charge more to compensate. Calculate this ratio by taking all existing mortgages plus all proposed mortgages and dividing by the appraisal value.
Here’s an example of how costs can vary based on LTV:
LTV (%) | Interest Rate (%) | Lender Fees (%) | Broker Fees (%) |
50% | 8% | 2% | 2% |
60% | 9% | 3% | 3% |
70% | 11% | 3.5% | 3.5% |
75% | 12% | 4% | 4% |
What You Need to Know About Fees
Your mortgage amount includes specific fees, such as lender, broker, and legal, which are included in your mortgage amount and count toward the LTV. If your request is already at 75% LTV before fees are added, you might exceed the limit and not get approved. Appraisal fees are typically not included in the LTV and are paid by the borrower directly after the inspection is performed.
A good mortgage broker will provide documents that clearly outline all costs related to the mortgage, and whether or not they are included in the mortgage amount. Reviewing the costs with your broker is always a good idea to make sure they fit your financial plan.
When applying for private mortgage lenders in Ontario, you must state why you need the money. Private lenders are usually lenient and will accept the most reasonable responses.
Some popular responses include:
- To pay off high-interest credit card debt
- To pay for home repairs or renovations
- To cover living expenses after a work layoff
- To stop a power of sale or foreclosure
- To pay tuition fees for college or university
In many cases, borrowers approach private lenders for mortgages and loans to help consolidate existing debt or prevent property loss through foreclosure or power of sale proceedings. Many people juggle multiple types of debt at once. For example, as noted above, you might have a mortgage and a significant amount of credit card debt or outstanding student loans. Since mortgage and student loans are owed to different collectors, you may have to keep track of multiple monthly debt payments. A mortgage from a private lender can be enough to pay off what remains on your mortgage and your student loans. Upon settling individual debts, you’ll have a monthly payment to your lender, simplifying your financial obligations. Many borrowers find this an easier way to manage debt.
People who cannot qualify for a low-interest rate loan at a bank are the kind of clients that private lenders seek out. Our private lender network can provide mortgages to people turned down by banks. Most private lenders will offer a rate between 8% to 12%.
Information on Lenders in the Caledon Real Estate Market
Caledon’s real estate prices have risen steadily since 2012, reflecting high property prices in Ontario Province. Ontario’s double-digit real estate growth drives people to private real estate lending for extra income. Ontario is a great real estate market and is considered one of the best places to live. It is also Canada’s economic powerhouse, meaning that real estate prices will continue to increase.