Hamilton is a great place to live. It may be easy to love the city, but it can be hard to get the funds needed to buy a home there. Most Canadians applying for mortgages and other loans get turned away by banks, credit unions, and other major financial institutions.
These lenders have strict requirements that lead to most mortgage applications being rejected. Working with a private mortgage lender in Hamilton may be the only way some borrowers can buy a home or access their home equity without selling it.
Private Loan Services in Hamilton
There are a few reasons why someone would need the services of a private lender:
- Losing a job
- Being self-employed
- Getting separation or divorce
- Having an unstable or hard-to-verify income
- Consolidating debt and reducing interest payments
- Having an illness that leaves you unable to work
- Renovating your home or second home to increase its value
Many of these reasons normally disqualify a person from being approved for a traditional bank loan, but not with a private lender.
Borrowers can access a wide range of financial services offered by private lenders in Hamilton, including:
- Home equity loans
- Home Equity Lines of Credit (HELOC)
- Bad credit mortgages
- Second mortgages
- Home renovation loans
- Bridge financing
- Debt consolidation loans
- Reverse mortgages (open to those 55 years of age and over)
- Renegotiated terms on a first mortgage
When getting a loan from a private lender, the loan is secured against property, usually a house, condo, or cottage, but it could also be a plot of land. If the borrower defaults on their private loan, the lender will initiate a power of sale. When a power of sale is initiated, the lender will get legal permission from a judge to sell the property to get their money back, just like a bank would.
Benefits of Private Mortgage Lending
They Offer Bad Credit Mortgages
Mortgages given to borrowers with ‘poor’ credit scores are known as bad credit mortgages. If borrowers have a credit score under 620, they may need to get a bad credit mortgage in Hamilton.
Having a bad credit score is not that unusual. Even a few missed credit card payments can lead to a low credit score. Private lenders are not subject to the same rules as banks and can provide mortgages for many kinds of borrowers, including those with bad credit.
Private lenders base their loans on the amount of equity in your home, not your credit score.
Faster Loan Financing
Banks and other traditional lenders are known to have a lengthy approval process, which can take weeks. Even when borrowers provide banks with everything they request, it will still take a long time to process the paperwork, which may jeopardize plans to buy a house.
Private lenders can quickly process loan applications, sometimes within a week. This speed is unmatched in the lending industry, making them a flexible option for emergency real estate financing.
A real estate deal may fall apart if funding isn’t provided immediately; if a home buyer is in this circumstance, they can quickly get emergency financing from a private lender in Hamilton. This will allow the buyer to purchase the home while they wait for their primary lender to finish processing their mortgage.
Private Mortgage Financing Requirements
Private lenders do not consider credit scores when lending money, and they are known as more lenient lenders than banks and credit unions. However, they do have their own requirements that borrowers must adhere to.
Private mortgage lenders in Hamilton consider your home’s market value and the value of all loans currently registered against the property. The ratio between the value of the requested mortgage and the value of the property is called a “Loan-to-Value” (LTV) ratio, and it is the most important metric private lenders use to determine which mortgage applications to approve.
The LTV ratio can be calculated by adding all the existing mortgages on a home and dividing that number by the market value of the property. For example, if a house in Hamilton could sell for $1,000,000, and the borrower wants a $600,000 private mortgage, the LTV would be 60%. Most Hamilton private mortgage lenders will lend up to 75% LTV.
The location of the property will also affect the LTV ratio that is acceptable. Buying or owning a home in Hamilton, Oakville, Toronto, Niagara Falls or any other large city will increase the likelihood that a private lender will accept a mortgage or loan application with a higher maximum LTV ratio.
Private mortgage lending requirements are different from those of banks, trust companies, and credit unions, which will also consider a borrower’s income levels, employment, and credit score in addition to their LTV ratio.
Since private mortgages are considered to be high-risk investments, private lenders demand higher rates and fees.
Private Hard Money Lending
Private hard money lenders operate just like most other private lenders. Hard money refers to hard assets such as houses, commercial buildings, plazas, rental properties, etc. Private money lenders usually personally inspect the properties they use as loan collateral. They will also need to see financial statements if the money is required for commercial or rental properties.
Getting a loan for your home or another real estate project can be difficult without the assistance of a private mortgage broker. Mortgage Broker Store can help you with all the required loan documents, whether it is for a new home purchase or refinancing a commercial building. The interest rates for commercial properties are usually higher than those for houses, condos and other residential properties.
Hamilton Living
The prices of homes in Hamilton have been rising dramatically from the early 2010s to the 2020s. In June 2012, the average price of residential property in Hamilton and Burlington was $658,237; as of June 2024, the average price of a home in the region rose to $831,676, with detached homes surpassing an average price of $1 million.
In recent years, Hamilton has moved away from steel production and spent millions revitalizing lands that were destroyed by factory pollution. Improved infrastructure from projects like the Red Hill Valley Parkway and Metrolink’s planned LRT expansion have helped boost property values in the city and turn it into a popular destination for urbanites across the Greater Toronto Area and the whole of Canada.
How Much Do Private Lenders Charge in Hamilton?
Private lenders can work with a wide range of borrowers, they don’t discriminate against those with poor credit or the self-employed. They are more willing to work with people and help them get the loans they need. However, this means that they take on a lot more risk than banks, and thus, they need to compensate for that added risk by charging higher interest rates and fees.
If someone wants to get a private mortgage in Hamilton, they can expect the lender to charge interest rates between 8% and 12% and fees between 3% and 6% of the mortgage.
The interest rates charged to a borrower depend on the LTV ratio, while the mortgage fees depend on the complexity of the mortgage, which includes the cost of dealing with any legal issues.
Borrowers interested in learning what kind of interest rate they can expect to pay for a mortgage can use the free interest rate calculator tool below.
Estimate the Rate on a Private Mortgage
Of all the different types of lenders, private mortgage lenders have the most lenient approval criteria. Private lenders will generally provide mortgages up to 75% of the value of the property. The ratio between the value of the requested mortgage and the value of the property is called a “Loan-to-Value” (LTV) ratio and is the main factor when it comes to approval on a private mortgage. These criteria are different from those of banks, trust companies, and credit unions, which will also consider a borrower’s income ratios, employment, and credit score in addition to their LTV ratio. Private lenders are usually not concerned with the creditworthiness of the borrower.
Since private mortgages are considered to be a high-risk investment, these lenders demand higher rates and fees. A borrower can expect to pay rates between 8% to 12% and fees equal to 4% to 6% of the mortgage amount. The rates are dependent on the LTV ratio, while the fees are dependent on the complexity of the mortgage. Which includes the cost of dealing with any legal issues. Approval can also depend on the location of the property, and in general, larger cities will have higher maximum LTV ratios. This rate estimation tool will take into account all of these factors and estimate what interest rate you can expect to pay for a mortgage.
How to Find Private Mortgage Lenders in Hamilton
Many people are moving outside dense cities like Toronto due to high house prices and cramped living conditions, and lots of them are turning to Hamilton for spacious and affordable housing.
The city is very attractive to investors, and the real estate market is rife with home competition. There is a lot of demand for Hamilton’s real estate, and banks can’t fulfill it independently. After a bank rejects their mortgage application, individuals can still purchase their dream home in Hamilton by finding the right private lender to collaborate with, despite the initial setback feeling devastating.
People whom banks reject can use a professional mortgage broker like Mortgage Broker Store to find and compare private mortgage lenders in Hamilton. Their team of mortgage experts has decades of experience in Ontario’s real estate industry, and they can work with you to find the best private mortgage lenders in Hamilton.