Like a lot of other areas in the country, the Ottawa Real Estate Board is reporting slower sales. In fact, the Canadian Real Estate Association through their Board’s Multiple Listing Service System has reported sales of residential properties dropped 29% between June of 2021 and June of 2022.
Ottawa Real Estate Board President Penny Torontow attributed the drops to inflation and rising interest rates. One of the results is alternative lending sources like private lenders are seeing an upsurge.
Are you wondering how much private lenders charge for a mortgage? Consider the fact that a traditional mortgage through the bank is getting harder to qualify for. In fact, the Globe and Mail reported (July 22, 2022) that applicants need to make an extra $18,000 to pass the stress test. Private lenders in Ottawa are an excellent alternative for people turned down by banks. Private lender mortgage requirements are far less strict than those of the banks. They focus more on the value of your property and less on your credit score.
More Info on Private Lenders in Ottawa
Here’s another consideration. The Bank of Canada is expected to raise its policy interest rate through 2023. Experts in the field are predicting the gap between variable and fixed mortgage rates will shrink. Some mortgage specialists are even saying a fixed-rate mortgage is the way to go. That makes homeowners immune to rate hikes until they come up for renewal.
Applying for a traditional mortgage still means you need to undergo a stress test. You’ll need to be able to afford payments as high as 2% over and above your mortgage contract rate. Homeowners might even need to pay is highest 5.25% more. It all depends on which number is higher.
Ottawa’s private mortgage lenders endure less government oversight. They can provide mortgages when banks cannot.
Private lenders in Ottawa are companies or individuals looking to invest in Ottawa real estate. Ottawa’s real estate market is known for its steady and stable growth. It is attractive to private lenders. There are many private lenders that specialize in properties located in Ottawa and the surrounding area. Lenders will typically loan out $30,000 or more, and typically for 1 year terms. Most private lenders will secure the loan to the property, which can be sold if the borrower does not make their payments.
A Different Focus on Credit Scores
Private lenders have different requirements than banks, and don’t place as much focus on credit scores. The primary concern for Ottawa private lenders are the home’s market value, and the value of existing debt secured against the property. This key metric is called a Loan to Value Ratio (LTV). A property’s LTV is equal to the value of existing debts against the home divided by the market value .
Here’s an example. A home in Ottawa could be sold for $100,000, and it had a $65,000 first mortgage, this means the LTV would be 65%. Many lenders in Ottawa don’t use 75% as the maximum anymore.
Reasons for Getting a Private Lender Mortgage
A private mortgage lender in Ottawa, will ask why you need the money. Common reasons include:
- To pay off high interest debts
- To upgrade or renovate an existing building
- Loss of work, or other income.
- A traumatic life event like a relative’s death or a car accident.
- To pay for a higher education.
Many people applying to private mortgage lenders have been turned down by a bank for a mortgage. Many of our clients have bad credit or insufficient income and we specialize in getting them mortgages . We also help clients repair their credit and become eligible for bank loans in the future.
Quick Mortgage Financing
Banks and credit unions have long approval processes, even when all the correct documents are provided. We are able to provide financing for time sensitive real estate deals. Connect with one of our Ottawa private lenders today.
We partner with a large database of lenders in Ottawa and the surrounding areas like Nepean, Kanata and Orleans. Mortgage Broker Store provides funding that can even stop a foreclosure or power of sale.
How Much Do Private Lenders Charge For a Mortgage?
Here’s what you can expect when you’re sorting through what these lenders charge.
Overall, the interest rates vary between 7 and 12%. Of course, this depends on your unique financial snapshot. Exact rates depend on your existing equity, other financial assets, and income.
The interest rates for private lending mortgages are higher than their more-traditional counterparts. The same is true for the fees on private mortgage loans. Someone taking out a private mortgage can expect to pay somewhere between 3% to 6% of the total cost of the mortgage loan in a fee. These fees cover the cost incurred by the private lender that get passed on.
There are some options for a private mortgage loan to sort through. These include:
- Negotiating new terms for your existing mortgage loan.
- A home renovation loan.
- A second mortgage or debt consolidation loan.
- A home equity line of credit.
Private lenders in Ottawa specialize in making sure people with bad credit get loans. When other lenders have turned you down, they are an alternative source of financing. Their set of criteria is more flexible than you’ll find in more traditional lending situations.
Information on Ottawa Private Mortgage Lenders
Ottawa is the capital city of Canada and the headquarters of its federal government. The housing market in this city has been historically strong and it is viewed by lenders as a good place to invest their money.
The average sold price for a house in Ottawa was $965,000 according to current MLS stats for August of 2022. In the last 56 days there were 49 new listings in the area. Those numbers represent 58.5% positive year-over-year change. The average number of days on market for a house in Ottawa was seventeen.