If you’re a homeowner in Mississauga, you might find that traditional bank loans are not always suitable for your needs. These lenders offer more flexible loan options. This article will help you understand how to get a mortgage in Mississauga, what fees you might pay, and why a private lender might be your best choice.
The province of Ontario has many desirable locations to buy a property and call home. Mississauga is no exception. With the advantages of a suburban area and being directly accessible to big city amenities, Mississauga appeals to many.
Mississauga-Based Lenders
Homeowners may not be aware that banks are not the only avenues open to provide mortgage financing. The mortgage sector is made up of different classifications of lenders that are classified into three broad categories:
- A lenders– Banks are classified as A lenders in the mortgage industry. Banks require homeowners/borrowers to demonstrate high credit scores and easy-to-calculate monthly salaries. Borrowers are put through mortgage stress tests to determine mortgage eligibility. With current rising interest rates, things have changed again. For example, BNN Bloomberg reports that the purchasing power of an average mortgage holder has been cut by a further 8% through new stress tests.
- B lenders- Credit unions/trust companies are classified as B lenders. These lenders have slightly less stringent mortgage criteria. Borrowers must, however, present with credit scores of at least 550, and traditional income is preferred to contracting or freelance income.
- C lenders– Private lenders are classified as C lenders. Private lenders base mortgage financing on criteria beyond credit, salary amount, and type. The criteria are based on the appraised value of your home, your home’s location, the current condition of your property, and the degree of the existing equity in your home.
Private Lenders Assessments
Your financial situation and loan type will determine the mortgage rates and fees for the negotiated loan.
- The overall current appraised value of your home — A private lender will carefully assess your current appraisal. A homeowner must bring an appraisal to an appointment with a private lender. This document is central to calculating the overall terms of a potential second mortgage.
- Your home’s current condition — Any recent renovations and any ongoing potential structural issues such as mould, water damage, or foundation issues.
- The location of your home — As in any real estate transaction, the location of a given property will influence the overall mortgage financing decisions.
- The degree of equity in your home—Generally, a private lender will need to see at least 25% of existing equity.
To calculate the eventual amount of a private mortgage loan, a private lender will also be calculating the Loan-to-Value (LTV) ratio. In general, a private lender will lend to a maximum of 75% LTV, translated as up to 75% of the appraised value of your home. The LTV ratio is the percentage of the property’s value owed in mortgages. Start with all existing mortgages plus all proposed mortgages, then divide by the appraisal value. If a homeowner has a home worth $1 million with a $500,000 first mortgage and is requesting a $250,000 second mortgage, the LTV ratio for the requested mortgage can be up to 75% of the property’s value.
What Is an Example of a Private Lender?
It’s helpful to look at an example to understand what a private lender does. Most alternative lenders will supply home mortgages when the property or house has more than 25% of the equity available.
So, an example works like this: If your home has been appraised at $1 million and you owe $750,000 on the mortgage, you could qualify through a private lender.
These private lenders primarily work with borrowers who take out mortgage loans on residential properties. The numbers are slightly different if you’re looking to get a commercial property mortgage. An example of a private mortgage lender could be a private investment company, wealth management firm, or individual investor who provides mortgage loans outside of traditional banking institutions.
Why a Private Lender?
People also ask why they might need the services of a private lender. There are various reasons why you might need money from these experts.
Private mortgage lenders in Mississauga can help you stop the proceedings on a foreclosure or power of sale. Some people use a private mortgage to manage and consolidate their debt. For example, if you have a large amount of credit card debt, student loans, and other amounts, having only a single sum to pay each month makes it more manageable.
Overall, people who don’t qualify for low interest bank loans find more success with private lenders. Remember, these individuals and companies are not subject to the same strict regulations as banks.
However, there are still some criteria for private mortgages. One of the most important is the Loan-to-Value (LTV) ratio. Private lending loans are generally easier to qualify for compared to those offered by traditional banks.
Are you asking, “What is an example of a private lender?” If so, starting your search with good information is a great idea. These lenders can work independently as part of a Mortgage Syndicate, Mortgage Investment Corporation.
When applying for a private mortgage, ensure you provide all your financial statements. Read on to learn more about the rates that can be charged.
Mississauga Real Estate and Mortgage Trends
A city with great transportation hubs to and from downtown Toronto and a host of head offices supplying the local workforce, the region’s draw is not hard to see. Coupled with parks and recreational facilities, Mississauga can offer all there is for a homeowner within a beautiful location.
Situated on the banks of Lake Ontario and just east of downtown Toronto, Mississauga is part of the Peel region. As of the last population census in 2017, the city had a population of 828,854. Its urban appeal and beautiful suburban neighbourhoods attract homebuyers, making it a popular place to live.
Like others in the province, Mississauga is an attractive location. The MLS® System of the Mississauga Real Estate Board reports a 43.2% increase from April 2023. The average home sale price is $1.1 million.
Considering this new reality, some homeowners may take advantage of newfound property appreciation by tapping into existing home equity to take out any number of second mortgage loan options. While this may be a preferred option, it may be more difficult to obtain mortgage financing from a Mississauga-based mortgage lender if a homeowner has poor credit.
Are second mortgage financing avenues open for a homeowner with damaged credit? The solution is with experienced private lenders operating across Mississauga and the GTA.
Fees and Mortgage Rates Charged by Private Mortgage Lenders in Mississauga
Higher home equity improves the potential for better loan terms in any mortgage arrangement. For an added advantage, bring proof of all income sources, including rental, self-employment, contract, and freelance earnings.
Private lenders typically charge mortgage rates of 8% to 12%, tailored to homeowners’ individual financial circumstances. Loan fees, including lender and administration costs, usually range from 3% to 6% of the total mortgage.
It is also advisable to continually work on improving your credit on an ongoing basis to obtain the most favourable terms on second mortgage financing when contemplating loaning with an A or B lender at a later date.
- Pay off any high-interest debts as soon as financially feasible.
- Pull a recent credit report and ensure familiarity with all reported information.
- Pay all bills on time if possible.
- Avoid taking on any additional debt before, or during obtaining private second mortgage financing.
- Steer clear of major financial changes like job switches or payment structure alterations at work.
Options with Private Mortgage Lenders in Mississauga
Mississauga homeowners and borrowers, don’t let credit issues stop you from obtaining the mortgage financing you need.
Mortgage Broker Store has access to a broad network of private lenders in the Mississauga area. A private lender can discuss options with you directly, aiding in achieving your mortgage goals.