If you are a ski enthusiast, then the City of Collingwood and the surrounding area provides enviable amenities and proximity to the premier Blue Mountain Ski resort. Situated on Nottawasaga Bay, Collingwood also has a proud history of shipbuilding. With such a beautiful backdrop and laid-back lifestyle, Collingwood remains an attractive place to buy a property and call home.
As of the latest 2016 consensus, Collingwood’s population is 21,793 and the city is located north of Toronto. With such a beautiful backdrop and laid-back lifestyle, Collingwood remains an attractive place to buy a property and call home. Reflecting the desirability of the region, real estate has appreciated to unprecedented levels and properties are selling in high numbers for the last 15 months despite the pandemic dragging us through a third wave.
According to the Collingwood May 2021 Housing Report, the price of a single detached dwelling has increased to $905,000 which represents an astonishing 80.4% year-over-year increase. In the first quarter of 2021 real estate appreciation increased by 14.2% and houses are selling very quickly with only an average of 10 days on the market
Private Lending Options for both Homeowners and Borrowers
With real estate numbers like this, obtaining mortgage financing to buy into such a robust housing market or using existing equity to pay for a second property is appealing for many. When shopping around for the best mortgage terms and rates, there remain many lending options open to those that wish to take out a primary or secondary secured mortgage.
This is particularly true for those that have exemplary credit. Many lending options remain open for those homeowners/borrowers who can demonstrate creditworthiness and substantial household income.
What if you have damaged credit? Although securing mortgage financing may be harder for Collingwood-based homeowners/borrowers if credit has been damaged, there remain well-established and experienced private lenders who will be able to negotiate first and second secured private mortgage loans.
What are these lenders looking for? When approaching a bank, a borrower is faced with very stringent lending criteria and the dreaded mortgage stress test (which is set to become even harder to pass next month with increased mortgage stress numbers.)
A borrower looking for a first mortgage (principal mortgage) or a current homeowner looking to secure a second mortgage on their property will have to demonstrate a substantial, easy-to-demonstrate household income, near-perfect credit, substantial additional assets, and a low debt ratio. Even a credit union or trust company will be demanding a solid credit score of 550 and above, substantial income, and a relatively low debt ratio.
There is a third category of lenders that will be able to provide mortgage financing for those that have poor credit, may be self-employed or contract-based employees and have high debt ratios. Private lenders can consider other criteria, namely the Loan-To-Value (LTV), degree of equity any additional assets that can help leverage the loan against.
Private lenders are basing second mortgage financing on the appraised value of the property and are leveraging loans against the property. For a primary loan, a borrower should demonstrate sufficient down payment, salary, and preferably a lower debt ratio. Any additional assets will also help determine the best rates that private lenders can offer.
- A Lenders- The banks
- B Lenders- Credit Unions/Trust Companies
- C Lenders- Private Lenders
What Are the Eligibility Criteria for Private First and Second Mortgages?
The three primary considerations for a private lender include:
- The Loan-To-Value (LTV) by assessing a recent appraisal of your property
- The overall debt ratio of a homeowner/borrower and any existing assets
- The degree of equity that exists in your home. Generally, a private lender will prefer to see at least 25% equity built in your home.
When assessing private financing a private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). For example, if your home is worth 900,000 dollars then a private lender will not lend more than $650,000 which represents 75% of the total value of your home. Private lenders will also take a look at a borrower’s credit and salary. Damaged credit however will not stand in the way of private mortgage financing.
The Interest rates charged by private lenders tend to be higher than the rates the banks routinely change. Banks can afford to do this because mortgage loan approval depends heavily on near-perfect credit. If your credit is poor, private loans are available to provide short-term mortgage financing. Interest rates will be between 7% to 12% with any associated fees ranging between 3% to 6% of the final cost of the loan.
What Can You Bring to a Private Lender to Negotiate a Private Loan?
When approaching a private lender, it is important to bring all the necessary paperwork as well as taking steps to prepare for private mortgage financing:
- Consider a pre-approval if you are applying for a principal mortgage.
- Be very familiar with your credit score and credit report.
- Research private lending options in your area.
- Arrange to sit down with a private lender after researching various options.
- Know what type of loan you feel would address your short-term financial needs.
- Gather all relevant paperwork.
- Bring a recent appraisal and proof of the degree of equity in your home if you are a current homeowner and looking to secure a second mortgage loan option.
- Bring recent Notice of Assessments
- Bring a list of additional assets if applicable
- Proof of downpayment (if applying for a First mortgage)
Mortgage Broker Store Can Direct you towards Suitable Private Mortgage Options in Collingwood
At Mortgage Broker Store we have access to a network of established Collingwood-based private lenders. We can determine the type of mortgage financing that will suit your financial objectives. We will be able to point you in the direction of a private lender to help negotiate terms on a secure mortgage loan option.
Poor credit does not have to stand in the way of securing mortgage loans. Whether you are seeking a first mortgage to purchase a home or would like to tap into the existing equity in your home, private lending options are available to help make these mortgage goals achievable.