A private lender is a company or individual that works separately from banks, credit unions, and trust companies. Private mortgage lenders in Newmarket can supply mortgages for people not qualifying for a bank loan. They also work with Etobicoke, Oshawa, Pickering, and Ajax applicants. Understanding the town of Newmarket can help you make a good decision, and private lenders can help support homeowners.
Traditional Mortgage Requirements
When applying for a traditional mortgage, you’ll need several different categories of requirements and documents.
- It’s important to have details on the property you want to purchase.
- You’ll also need proof of your income and government documents identifying you.
- You’ll also need to supply details on the source of your down payment. That could include a gift, RRSP account, previous sale proceeds, or savings.
- Financial information is another requirement. That includes banking statements, your net worth, and your credit score.
You’ll also need to supply a list of investments and assets. Stocks, RRSPs, real estate, cars, and boats should be added. A credit score is a major metric if you’re looking for a traditional loan. According to Equifax, mortgage applicants with scores below 660 are less qualified to get good rates and terms.
People not qualifying for these traditional loans can look to alternative sources.
Mortgages from Private Lenders
Newmarket private lenders provide registered mortgages secured against real estate. The Ontario Mortgage Act allows the holder of a registered mortgage to sell a property if the agreed-upon fees are not paid. Private lenders supply loans that fall under the Act starting at $20,000. The balance needs to be repaid in one year, but longer periods can be negotiated.
People without traditionally verifiable income seeking second mortgages and other alternative products pay higher fees for these mortgages. For example, the rates for a second mortgage on an existing property average around 8% and 12%.
Other requirements apply to private mortgages. These are high-risk investments, and alternative lenders want to be sure they can recoup their money.
- A home appraisal is generally required. The main goal is to put together some information so the current value of a property can be determined. Usually, this is done by assessing the property’s condition and comparing it to recent sales. Determining the condition of the location involves looking at exterior and interior size, maintenance and upgrades, and the age of important items like the roof. We must compile the necessary information to accurately determine the current value of the property.
- The value of existing debts is another factor that gets considered before any application is approved.
Banks emphasize an applicant’s credit score. These are just a few factors separating traditional from alternative lending requirements. Private lenders prioritize the Loan-to-Value (LTV) ratio.
The LTV and Private Lender Mortgages
Private lenders calculate this ratio before making any offer. The LTV divides the amount owing on a mortgage by the property’s most recently appraised price. Many private lenders in Newmarket will only loan to a maximum of 75% LTV.
Here’s how the formula works.
If you own a property with a market appraisal of a million dollars and owe $750,000 on a mortgage, you can qualify for this type of private mortgage financing.
Reasons to Apply for a Private Mortgage
There are several reasons people find themselves looking for a private mortgage. They include:
- To stop a power of sale or a foreclosure. There’s a difference between these two financial tools, but the result is the same. The homeowner loses their property. With a foreclosure, the lender takes the title to the property. The homeowner sees nothing from the sale. With a power of sale, they will receive the remaining funds after settling outstanding debts.
- For living expenses while suffering through a layoff.
- To pay for home repairs or renovations. According to Architectural Digest, a kitchen renovation can set you back as much as $50,000.
- To pay off high interest credit card debts. News reports from March 2023 peg Canadian credit card debt at a record number – $100 billion.
Our network provides mortgages for those rejected by traditional lending institutions in Newmarket and other parts of Ontario.
Newmarket Real Estate Trends
The largest visible minority group in Newmarket is Chinese. According to the Statistics Canada census from October 2022, 8,635 people claimed that background and lived in Newmarket. Most people (84,610) who live in that city carry on their conversations in English. Newmarket is an affluent location. As of 2021, the median household income there was $110,000. People living in Newmarket want to understand their financial options, including what private mortgage lenders can do for them. That means understanding the differences between these alternative options and more traditional choices.
Newmarket MLS® stats for May 2024 report 232 new listings in the last 28 days. The average sold price in that time frame was $1.2 million. That represents a positive change for two different metrics. The monthly change was a bump of 0.3%, while the quarterly change was also positive at 1.6%.
The yearly change in housing prices in Newmarket showed a drop of 2.8% YoY. Out of 23 other locations in the GTA, Newmarket is the 7th fastest-growing location and the 12th most expensive.
According to Statistics Canada numbers last updated in February 2022, the town of Newmarket had 87,942 residents in 2021. That represents a large jump from the 65,788 people who lived there in 2001.