Obtaining a mortgage in Niagara Falls and throughout Ontario has become increasingly difficult due to stricter rules imposed by banks in recent years. Most individuals will not qualify for financing based solely on their credit score.
One of the most popular alternative lenders that borrowers can turn to is private lenders. Private lenders are individuals or companies that offer lending services to borrowers. They are less regulated, so they specialize in servicing borrowers that most banks would reject. Banks in Niagara Falls are reluctant to provide mortgages to people with a low credit score, considering any score under 620 out of 900. Niagara boasts a thriving real estate market with diverse options, including private mortgage lenders catering to the community’s various financial needs and preferences.
Mortgages and Loans from Private Lenders in Niagara Falls
Private mortgage lenders generate income by investing in the lucrative real estate market by offering loans to homebuyers and homeowners in cities like Toronto and Niagara Falls.
Niagara Falls’ expanding real estate market attracts private lenders due to its promising growth potential. In May 2024, the Niagara Association of Realtors (NAR) reported that the year-to-date price of a home in the region was $653,900.
Private lenders in Niagara Falls prefer offering registered mortgages secured by real estate.
This reduces their risk, as they retain the legal right to sell the borrower’s property to recover their funds in case of default. The Ontario Mortgage Act states that a lender can use the legal process known as “Power of Sale” to seize and sell property with a mortgage on it if the borrower neglects their obligations in the mortgage agreement.
How are Private Loans Used for Bad Credit?
Banks value credit scores highly and will not lend to those deemed to have bad credit. Private loans may be the only way some people can get financing if they have a low credit score.
Borrowers with bad credit can work with private lenders to access financing options for various uses, from purchasing a home by getting a bad credit mortgage to paying off debts with a debt consolidation loan or even funding personal investments. Bad credit borrowers can get the same loans as regular borrowers but through a private lender instead of a bank.
Approval Criteria for Private Lender Mortgages
Private lenders want to know the market value and total debts on a property before approving loans. Banks factor in credit scores for approval, but private lenders use alternative criteria, independent of credit scores, for approval decisions.
A private lender will divide total debts by the appraised value of the home to get the loan-to-value (LTV) ratio. A house with a market value of $1,000,000 and debts totalling $800,000 will have an LTV of 80% and most of the private lenders in Niagara Falls will not lend to the property with an LTV ratio that is greater than 75%. All existing mortgages, plus all proposed mortgages, are divided by the appraisal value.
Lenders take a huge risk when they lend to people with bad credit, so private lenders take extra measures to protect themselves. This is why private lenders charge higher rates of interest to their borrowers than a bank will. They also usually charge a small upfront fee, ranging from $500 to $675, to cover the costs of processing paperwork.
Common Reasons for Getting a Private Mortgage
When applying for a private mortgage, you must provide reasons for seeking the loan. They typically exhibit leniency compared to banks and accept most responses provided by applicants. Some of the most common reasons why people work with private lenders include:
- To pay off debts
- Being self-employed
- To pay for home repairs or upgrades
- To stop a power of sale or a foreclosure
- To pay tuition fees for college or university
- For living expenses after being laid off from work
- Not having a stable or easily verifiable source of income
- Not qualifying for loans offered by banks and other financial institutions
Private Lending Services in Niagara Falls
The most common private lending services in the Niagara region are:
Debt Consolidation. A borrower takes out a loan to pay off all their existing debts. While they still owe the same amount, they only have to pay one lender and one interest rate. Private lender debt consolidation loans offer lower rates than credit cards, aiding borrowers in saving money and debt repayment. Learn more about debt consolidation in Niagara Falls here.
Home equity loans. These are any loans that use home equity as collateral. Since the loan is backed by property, home equity loans have some of the lowest interest rates on the market. Home equity loan funds offer versatility: finance renovations, buy property, clear debts, or invest, tailored to borrower needs.
Home equity line of credit (HELOC). This lending option provides unique flexibility. Borrowers are not given a lump sum of cash. Instead, they can withdraw funds from their line of credit as needed. They can withdraw cash freely within the credit limit without restrictions on frequency or amount.
Bad credit mortgages. These are mortgages catered to borrowers with low credit scores. Access to private lending ensures those rejected by major institutions can still secure desired homes in Niagara Falls. Bad credit mortgages entail higher rates, shorter terms than regular ones, and additional fees. Private lenders are the most common bad credit mortgage providers in Niagara Falls and throughout Ontario.
Rapid Financing from Private Lenders
Banks in Niagara Falls have to follow a rigorous, time-consuming mortgage approval process. You cannot expedite this approval process, posing challenges for urgent property sales requiring swift processing. Private lenders can provide loans much faster than traditional lending institutions, even as fast as one week.
How to Find Professional Private Lenders in the Niagara Falls Real Estate Market
Mortgage Broker Store has been active in Niagara Falls’s real estate market for decades. They have developed a vast network of private lenders across Ontario, from Windsor and Niagara to Thunder Bay and back. They connect you with Niagara private lenders and negotiate favourable terms, leveraging their extensive network.
Explore mortgage options beyond banks in Niagara Falls; private lenders offer flexible solutions.
- Introduction
- Mortgages and Loans from Private Lenders in Niagara Falls
- How are Private Loans Used for Bad Credit?
- Approval Criteria for Private Lender Mortgages
- Common Reasons for Getting a Private Mortgage
- Private Lending Services in Niagara Falls
- Rapid Financing from Private Lenders
- How to Find Professional Private Lenders in the Niagara Falls Real Estate Market