There are many desirable locations to buy a property and call home throughout the Province of Ontario. Mississauga is no exception. With both the advantages of a suburban location as well as being directly accessible to big city amenities, Mississauga holds appeal for many.
A city with great transportation hubs to and from downtown Toronto and a host of head offices supplying the local workforce, the draw of the region is not hard to see. Coupled with parks and recreational facilities, Mississauga can offer all there is for a homeowner and all within a beautiful locale.
Situated on the banks of Lake Ontario and just East of Downtown Toronto, Mississauga falls under the region of Peel. As of the last population census in 2016, the city stood at 721,599. Mississauga continues to attract new homebuyers and its urban appeal and access to beautiful suburban neighborhoods encourage many to reside in the area.
Mississauga is an attractive location like others in the Province. House sales had skyrocketed during 2020 and through the first half of 2021. However, the trend is moving in a different direction as of June 2022.
The MLS® System of the Mississauga Real Estate Board reports a 42.9% YoY decline from June of 2021. There was a drop of 31.9% in total home sales from all of 2021.
Considering this new reality, some homeowners may choose to 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 there still second mortgage financing avenues open for a homeowner with damaged credit? The answer lies with the network of well-established and experienced private lenders that operate throughout Mississauga and the GTA.
Homeowners may not be aware that the 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. These mortgage stress tests increased in rigor on June 01, 2021, with the implications of new mortgage rules. 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 eight percent 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 as opposed to contracting or freelance income.
- C lenders– Private lenders are classified as C lenders. Private lenders will base mortgage financing on criteria beyond credit and 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.
While the banks may base mortgage financing primarily on both credit score and income level, a private lender will be assessing your home’s value when negotiating mortgage financing. Your home is used to leverage private mortgage financing and as such a private lender will be assessing different criteria to come up with the overall loan amount.
Your unique financial circumstances and type of mortgage loan will help to determine the mortgage rates and fees associated with the negotiated loan. Private lenders will be assessing:
- The overall current appraised value of your home- A private lender will be carefully assessing a current appraisal of your home. A homeowner will need to bring an appraisal to an appointment with a private lender. This document is central in calculating the overall terms of a potential second mortgage.
- Your home’s current condition– Any recent renovations and conversely any ongoing potential structural issues such as mold, 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 that is existing in your home– Generally a private lender will need to see at least 70,000 in existing equity in order to negotiate second mortgage financing.
To calculate the eventual amount of a private mortgage loan, a private lender will also be calculating the Loan-To-Value (LTV). In general, a private lender will lend to a maximum of 75% LTV which is translated as up to 75% of the appraised value of your home.
There are some other things people want to know about these professionals.
What is An Example of a Private Lender?
The best way to answer the question, what is an example of a private lender?, is to describe what one does. Most of these alternative lenders will supply home mortgages when the property and or house has at least 25% of the equity available.
So an example works like this. if your home has been appraised at $1000000 and you owe $750,000 on the mortgage, you could qualify through a private lender.
Most of the mortgage loans these private lenders work with are taken out on residential properties. If you’re looking at getting a mortgage for a commercial property, the numbers are a little different. The amount of equity needed for those types of transactions is usually about 35 percent.
Why A Private Lender?
People also ask why they might need the services of a private lender .
There are a variety of reasons why you might need money from these experts.
A private mortgage 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 and student loans as well as 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 ratio (LTV). In the end, it’s important to keep in mind that private lending loans are easier to qualify for than the ones that more traditional banks offer.
Are you asking “ What is an example of a private lender?” If so, it’s a good idea to start your search with some good information. These lenders can work as part of a Mortgage Syndicate, Mortgage Investment Corporation, or independently.
If you’re filling out an application for a private mortgage, you should be prepared to provide all of your financial statements. Read on to find out more about the rates that can be charged.
Fees and Mortgage Rates Charged by Private Lenders
As is any loan arrangement, the more equity that you have in your home the better the potential for the best terms on the final mortgage loan. It is also advantageous to bring proof of all sources of monthly income including rental/investment income, self-employed, contract-based, and freelance.
Depending on the unique financial circumstance of a given homeowner, a private lender will generally charge mortgage rates between 7% to 12%. Any fees associated with the loan including overall costs of the private lender and administration fees tend to range between 3% to 6% of the total cost of the mortgage loan.
It is also advisable to continually work on improving your credit on an ongoing basis to obtain the most favorable 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 make sure you are familiar with any information that is reported on it
- Pay all bills on time if possible
- Avoid taking on any additional debt prior to, or during the course of obtaining private second mortgage financing.
- Avoid any major changes to your financial picture such as changing jobs or switching the payment structure at your current employment position.
Help with Private Mortgage Options
If you are a Mississauga homeowner or a borrower that would like to obtain mortgage financing, don’t let credit issues stand in your way of purchasing a home or taking out hard-earned equity from your property to pay for needed expenses.
Mortgage Broker Store has access to a broad network of private lenders in the Mississauga area. A private lender will be able to sit down with you and discuss your options directly which will help you achieve your mortgage goals.
At Mortgage Broker Store we are in a position to look at your unique financial circumstances and advise as to the best private loan options and lenders that will be able to handle your financial objectives directly.