- How Do Private Lenders Calculate Mortgage Loans?
- Different Types of Private Mortgage Options for Kingston-based Homeowners/Borrowers
- Common Traits for All Private Mortgage Financing Options
- What To Bring When You Sit Down with a Private Lender
- Mortgage Broker Store Can Negotiate Different Types of Second Mortgage Loan Options
It is a paradox that has baffled real estate professionals and represents a trend that has been mirrored in other areas throughout the Province. During what has amounted to the most severe pandemic to occur in our lifetimes, the housing sector in Kingston has not only survived the Covid storm but has been robust throughout the pandemic. Throughout 2020 and into the first half of 2021 Kingston housing numbers continue to be impressive.
Situated on the Eastern end of Lake Ontario, the mouth of the St Lawrence River, and also on the most southerly end of the world-renowned Rideau Canal, Kingston serves as a popular tourist destination.
With beautiful historic architecture in the vibrant city center built for the most part in limestone, Historic Fort Henry, Canada’s oldest University, and unparalleled outdoor activities, Kingston also remains a beautiful place to call home. With a population of around 123, 798, the city continues to grow at a rate of 0.56% per year.
Kingston experienced a record year in 2020 in terms of house sales and increases in the price of the average home in the Kingston area. Houses are being snapped up in a record number of days and continue to sell well above asking in Kingston.
The price of a single detached property in Kingston in June 2021 has risen in the double digits to $ 582,179 which is a year-over-year increase of 27.3% from June 2020. House sales on average are up by 18.9% when compared to the 10 years average Kingston housing sales numbers. A record 2,539 units were sold year-to-date which represents a 51.9% increase from June 2020.
The housing numbers have led many to seek refinancing options, tapping into newfound appreciation in their homes. However, despite the extremely positive Kingston real estate numbers, some existing Ontario homeowners may have damaged credit and as a result, many have been turning away from the bank for mortgage refinancing. If poor credit has represented an obstacle when seeking mortgage financing, well-established private lenders are available in the Province to provide short-term mortgage financing.
How Do Private Lenders Calculate Mortgage Loans?
Private lenders can assess broader criteria which enables them to negotiate mortgage financing regardless of credit score. What exactly are Kingston-based private lenders looking for:
- A recent appraisal of your property
- Substantial equity in your home
- Any additional financial assets (if applicable) to help leverage mortgage financing against
- All sources of monthly income (including investment income, self-employed income, contract-based income, and freelance income.)
- The overall Loan-To-Value
Based on the appraised value of your property, a private lender will calculate the Loan-to-Value (LTV). Most private lenders will lend up to 75% LTV which represents 75% of the appraised value of your property.
Any fees associated with a private loan will generally fall between 3% and 6% of the total cost of the private mortgage loan. Interest rates will typically range between 7% and 12%.
Why are the rates and fees higher on private loans compared to advertised bank rates? The answer is simple. With poor credit and non-traditional income streams, lenders view these mortgage loans as inherently higher-risk loans. Banks require exemplary credit and substantial household income and can therefore offer lower corresponding rates.
Different Types of Private Mortgage Options for Kingston-based Homeowners/Borrowers
Refinancing options for homeowners wishing to use their home as collateral and existing equity can include:
- Home equity loans – A second mortgage utilizing existing home equity to be used for a multitude of short-term financial needs
- Home Equity Line of Credit (HELOC) – Also utilizing existing equity and serving as a revolving line of credit enabling funds to be available as the balance is paid off, a homeowner only needs to pay the monthly interest on the line of credit.
- Debt Consolidation Loans – If you have multiple debt payments, a debt consolidation loan can help merge these payments into one manageable monthly payment. This will enable all associated housing costs to be covered more comfortably.
- Home Renovation Loans – Accessing equity to pay for any updates or renovations for your property. The funds are negotiated on a short-term basis.
- Bridge Financing – Serving as a bridge between financial obligations or providing the necessary short-term funds to meet immediate financial objectives. Bridge loans are typically 3-6 months in length and are structured to provide a temporary financial solution.
- Take out a Second Mortgage to pay for immediate expenses and pay off mortgage arrears if behind in the mortgage payments or help pay for monthly principal mortgage payments.
- Refinance the terms of the principal mortgage loan to allow monthly payments to be made more easily.
Common Traits for All Private Mortgage Financing Options
- All Privately negotiated mortgage options are structured as short-term only. Typically, a private loan will be 1-3 years.
- Private mortgage loans are negotiated quickly. The processing time generally takes a little as 1 to 5 days. This represents a faster turnaround time than offered by the banks.
- Private second mortgage loans tap into existing equity in your home.
- Private loans can be negotiated despite poor credit.
What To Bring When You Sit Down with a Private Lender
- A list of additional assets that you may have besides your primary residence.
- Paperwork proving all sources of monthly income including investments income, contract income, self-employed income sources, and child/spousal support monthly income.
- A recent appraisal on your property
- 3 Years of NOA’s if applicable
- The clarity in terms of what type of private mortgage financing you will most likely be needing.
Mortgage Broker Store Can Negotiate Different Types of Second Mortgage Loan Options
With access to a broad network of well-established and experienced private lenders across Ontario, Mortgage Broker Store can connect an interested homeowner to private lenders to discuss various refinancing options.
We will also be able to negotiate private financing directly, depending on your specific financial objectives. Poor credit and non-traditional income need not be a barrier to obtaining a bridge loan or any other loan to help pay off any pressing monthly liabilities. Don’t hesitate to contact us at your convenience to discuss the best options to suit your unique financial needs.