Ontario is known for its charming small towns and Georgetown is no exception. Situated on the Credit River and only 60 km west of Toronto, and brimming with small-town quaintness, the proximity to bustling central Toronto makes the city an attractive place to live. Named after George Kennedy who settled the area in 1821, Georgetown has a population of 42,123,000 as of the last population census in 2016.
The city has benefited from the Ontario booming housing market with property appreciation and housing sales skyrocketing over the last 15 months. The price of a single detached property has risen to 1.1 million in May 2021. This represents a 30.2% increase in the average price of a home compared to May 2020. In the first quarter of 2021 housing prices increased by 15.6%.
With housing numbers like this, obtaining mortgage financing to buy into the robust Georgetown market or tap into existing home equity is in increased demand.
Georgetown Lending Options for Current Homeowners and Borrowers
It may be challenging to determine what is the best lending option available that answers your unique financial circumstances and mortgage objectives. With the possibility to gain significant equity when purchasing a home in the current Georgetown housing market, consulting a lender will be a step many will be looking to take.
It may also come as a surprise to know that in the mortgage industry there are different lending options available contingent primarily on the creditworthiness of a prospective homeowner/buyer. These lenders fall under three broad categories:
- A Lenders– Banks make up this group of lenders. The criteria that are required for homeowners/borrowers are very stringent. Banks will demand exemplary credit, a low debt ratio as well as full-time traditional yearly income to approve mortgage loans. Loans will tend to be long-term amortized mortgages. The banks deem these loans as low risk. If a borrower is not able to come up with a 20% down payment the Canadian Housing and Mortgage Corporation will provide mortgage insurance to mitigate risks for the banks.
- B Lenders– Credit unions and trust companies fall into this category of lenders. These lenders can provide mortgage financing for credit scores less than what the banks demand. Lending criteria still will include substantial household income, a credit score of at least 550, and substantial household income.
- C Lenders– Private lenders fall into this group of lenders. Private second mortgage options are available for a Georgetown homeowner/borrower if credit is an issue. Private loans will include primary mortgages (first mortgage) as well as various second mortgage options for current homeowners. C lenders will be evaluating the degree of existing equity, the current appraised value of the property as well as income, sufficient down payment (if applying for a primary mortgage), and any additional assets to leverage the mortgage loan against.
What Types of Private Mortgage Loan Options are Available for the Georgetown Borrower/Homeowner?
Poor credit will not be a barrier to obtaining private secured mortgage financing. Although the banks and credit union/trust companies may turn away a borrower with a high debt ratio and/or bad credit, private lenders will be able to evaluate other criteria to approve mortgage financing. There are three primary areas that a private lender will focus on when determining mortgage loan eligibility:
- 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.
Based on these criteria private lenders will be able to provide different mortgage loan options depending on the specific needs of the homeowner/borrower:
- Home renovation loans – Home equity can be used to take out a private home renovation loan. Funds can be put towards any renovations and fixes that will further increase your home’s market value and increase your enjoyment while living in your property.
- Bridge financing – If you require short-term financing for different reasons private bridge financing can help bridge the gap. Similar to most private loans, it is negotiated on a short-term basis. Most private loans are of term lengths between 1- 3 years.
- Negotiating new terms on your principal loan – Renegotiating some of the terms of your current primary mortgage can ease the financial strain and help to ensure mortgage payments do not fall into arrears.
- Debt consolidation loans – If managing multiple debt payments are straining the household budget, private debt consolidation loans can help roll these payments into one monthly debt payment. Debt consolidation loans can help increase your credit score if you make the payments in full and on time each month.
- Home Equity Line of Credit (HELOC) – This represents a revolving line of credit and can be used as needed. The Line of credit is based on the existing equity in your home
- Home Equity Loan – A home equity loan will utilize the existing equity in your home. A lump sum is negotiated, and monthly payments are made on a home equity loan. This loan is considered a second mortgage type and the funds can be used for different uses.
What Steps Can Be Taken Before Applying for a Private Mortgage Loan?
- 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.
- 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.
What Criteria are Private lenders Looking for?
When negotiating secured mortgage financing a private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). If your home is worth 900,000 dollars, then a private lender will not lend more than $675,000 which represents 75% of the total value of your home. Private lenders will also factor in a borrower’s credit and salary
Poor credit and self-employed or contract-based salary will not stand in the way of private mortgage financing, unlike the banks and credit unions who rely heavily on credit scores and creditworthiness, and traditional income types.
The Interest rates charged by private lenders tend to be higher than the banks routinely change. Banks can afford to do this because mortgage loan approval depends heavily on exemplary credit. If your credit is damaged, private loans can be an option that will provide short-term mortgage financing.
Contrary to the banks that can charge competitive mortgage rates, Interest rates on private loans will be between 7% to 12%. Any associated fees will range between 3% to 6% of the final cost of the loan.
Mortgage Broker Store Can Direct you towards Suitable Georgetown-Based Private Mortgage Options
At Mortgage Broker Store we have access to a network of established Georgetown-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.