A private lender is an individual or company that operates independently of provincial and federally regulated bodies like trust companies, credit unions, and banks. They offer a variety of loans, including first—and second-mortgage loans and home equity loans.
Mortgages from Private Lenders
Most private mortgage lenders in Innisfil specialize in hard-to-place mortgages that traditional lending institutions won’t approve. Their flexibility allows them to offer credit to individuals with low credit scores and incomes.
Innisfil private lenders loan out money as registered mortgages secured by real estate. That way, they have Power of Sale on properties in default.
Loans are typically for one year unless the client requests otherwise. Depending on individual circumstances, the amount can be $20,000 or more. Riskier products like second mortgages carry higher fees than those charged by banks and credit unions.
Understanding the requirements for one of these loans can help anyone make an informed decision.
Fast Financing from Private Lenders
Applying for a mortgage from a more traditional institution is a tedious process that takes a longer period. For example, some larger banks can take approximately 30 to 45 days to process an application. However, you can get a conditional decision with an estimated closing cost only around three days after applying.
However, the process of underwriting, home appraisal, and getting an inspection comes next, and that takes time.
In addition, you should get pre-approved for a traditional loan first. Having this estimate is good, but you’ll need to be careful to avoid making large purchases or applying for further credit.
Private lenders can provide streamlined approvals in as little as 24 hours or, at the longest, a week. These alternative lenders look beyond the traditional borrowing criteria. To speed things up, they consider a property’s value and outstanding debts rather than the credit score.
Approval Criteria for a Private Loan
Private lenders make lending decisions based on market value and debt. While banks rely on credit scores, private lenders emphasize other metrics, such as the Loan-to-Value Ratio (LTV). That number compares the amount of money applied against the asset’s market price. Here’s an example.
A home is appraised for $1 million. The current homeowner wants a private mortgage of $600,000. The LTV is 60%. Most private mortgage lenders in Innisfil will loan up to 75% LTV.
Private lenders offer more flexible options for approval. These are attractive to certain people who will get the most from this type of mortgage.
Reasons Why People Need Private Mortgages
People who apply for private mortgages face everything from unexpected lifestyle changes to unforeseen home issues. Some of those reasons include the following:
- To pay off high-interest credit card debt. News reports (CTV March 09, 2023) say that credit card debt reached $100 billion for the first time. The report blamed high inflation and rising interest rates.
- To pay for living expenses after a work layoff. Here are some comparison numbers for these expenses by province for 2023. According to the statistics, you’ll need around $7,071 CDN monthly to live in Toronto. Even with a good job.
- To stop a power of sale or foreclosure. The first is more common than the second. But either one can wind up getting a homeowner evicted. Here’s detailed information on how private mortgages can stop a power of sale.
- To pay for home repairs or renovations. A foundation repair can cost $4,951 on average, with the high end peaking at $7,766.
- To pay tuition fees for college or university. For example, the average undergraduate cost for a Canadian student rose from $4,400 CDN in 2006 to $6,834 CDN in 2023.
Individuals who cannot get a bank loan are the ideal clients for private lenders. We have a large network of lenders who can provide competitive mortgages to people rejected by banks. This is particularly useful in emergencies that urgently need financing.
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 the Innisfil Real Estate Market
Having some information on the real estate trends in Innisfil supplies a complete picture. According to the current MLS stats, the average sold price as of August 2024 is $951,358. That represents a monthly increase of 15% and a yearly increase of 1.8%; the quarterly change is positive and shows a 6.9% gain.
According to Areavibes, Innisfil’s total crime rate is 44% below the national average. Property crime is 45% below the average for the entire country, and violent crime is 42% lower.
These statistics are important to consider if you plan to get a mortgage in Innisfil. You should also consider private mortgage lenders as an alternative to a conventional loan. Read on to find out more about this method.