Are you wondering how much private lenders charge for a mortgage? Consider that a traditional mortgage through the bank is getting harder to qualify for. Private lenders in Ottawa are an excellent alternative for people turned down by banks. Private mortgage lender 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.
Like many other areas in the country, the Ottawa Real Estate Board is reporting slower sales. Ottawa Real Estate Board President Penny Torontow attributed the drops to inflation and rising interest rates. One result is that alternative lending sources like private lenders are seeing an upsurge.
Reasons for Getting a Private Lender Mortgage
A private mortgage lender in Ottawa will ask why you need the money. Common reasons include:
- A traumatic life event like a relative’s death or a car accident
- To upgrade or renovate an existing building
- To pay off high-interest debts
- Loss of work or other income
- To pay for a higher education
Quick Mortgage Financing
Banks and credit unions have long approval processes, even when all the correct documents are provided. Mortgage Broker Store can provide financing for time-sensitive real estate deals. Connect with one of our Ottawa private lenders today.
We partner with an extensive 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.
Private Mortgages
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 growth, which attracts private lenders. Lenders typically loan out $30,000 or more for one-year terms. Most private lenders will secure the loan with 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 concerns 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.
If a homeowner has a home worth $1,000,000 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. All existing mortgages, plus all proposed mortgages, are divided by the appraisal value.
More Information on Private Mortgage Lenders in Ottawa
Here’s another consideration. The Bank of Canada raised its policy interest rate.
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 the 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.
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.
How Much Do Private Lenders Charge for a Mortgage?
Here’s what you can expect when sorting through what these lenders charge.
Overall, the interest rates vary between 8% and 12%. Of course, this depends on your unique financial situation. Exact rates depend on your existing equity, other financial assets, and income.
The interest rates for private lending mortgages are higher than those of 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 costs incurred by the private lender, which they pass on to borrowers.
There are some options for a private mortgage loan to sort through. These include:
- Negotiating new terms for your existing mortgage loan
- Home renovation loan
- Second mortgage or debt consolidation loan
- Home equity line of credit
Private lenders in Ottawa specialize in helping people with bad credit get loans. When other lenders have turned you down, they are an alternative source of financing. Their criteria are more flexible than those in more traditional lending situations.
Information on Private Mortgage Lenders in Ottawa
Ottawa is Canada’s capital city and its federal government’s headquarters. Lenders view this city’s historically strong housing market as an excellent investment opportunity for their money.
The average sold price for a house in Ottawa was $678,376, according to current MLS stats for March of 2024. Those numbers represent 4.5% positive year-over-year change. The average number of days on the market for a house in Ottawa was 22 days.