Canadian banks are government regulated. The rules placed on these institutions discourage a large part of the population from getting a mortgage. People without the high credit score required by banks can turn to private mortgage lenders in Sault Ste. Marie. They are not governed by the same rules as banks so they can provide hard-to-place loans. Some of the loans that get rejected by more traditional institutions include bad credit mortgages. There are some other unique reasons to use one of these services including stopping a power of sale or foreclosure.
These experts can help stop either process, but the homeowner needs to have sufficient equity.
Many private lenders can approve a mortgage to homeowners in a power of sale or foreclosure.
However, usually the total value of the mortgage cannot exceed 75% of its estimated value. People often wonder: “How can I pay back a private lender?” It’s important to remember that you’ll be paying a higher interest rate than more traditional lending institutions.
Private mortgage lenders will look at the value of the property as well as any registered debts on the property. If a homeowner already has a first mortgage, the lender may be able to offer a new second mortgage. A second mortgage is typically used to address urgent financial needs to pay off more expensive personal debt. A home equity loan is another popular private lending term, however, it is important to know that this is usually another way to describe a private mortgage.
Private mortgages can be a simple and effective solution for people facing financial hardship. With a private mortgage, multiple high-interest debts can be combined into a single easy payment.
While banks usually offer the lowest rates and fees, their high credit score and income requirements drive many interested people away. Most private mortgage borrowers will later pay off their private loan with a bank loan when it is possible to do so.
Mortgages from Private Lenders
Private lenders in Sault Ste. Marie typically lend money in the form of registered mortgages on the property. The registered mortgage agreement gives the lender the power to sell the mortgaged property if mortgage payments are not paid. A private lender will lend as little as $30,000 for a one-year term. People with limited income can opt for “pre-paid mortgage payments” which means the borrower is given extra funds which are used to pay the monthly mortgage payments.
Riskier mortgages attract higher fees compared to bank loans because the lenders must cushion themselves from losses in the event you default on payments. Some of the fees are required to pay real estate lawyers and appraisal among other professionals needed to process the loan. While a mortgage lender can sell your property after completing a power of sale action, the Ontario Mortgage Act requires that the first lender be paid first before the second and third can make their claims respectively.
How Do You Pay Back a Private Lender?
The majority of people who borrow from a private lender in the first place have had some significant life event happen that has impacted their earning potential. These events include job layoffs, divorce, or death in the family. Private mortgages are usually too expensive for people in the long term, so most private mortgage borrowers need to make an exit strategy for the mortgage. The most common ways to repay a private mortgage is by getting a new cheaper mortgage or by selling the property. Most people prefer to keep their homes and will work toward improving their credit and employment situation so they can qualify at a bank. People whose situations do not improve usually sell or borrow from family to pay off the private lender.
Approval Criteria for Private Mortgages
Private lenders are interested in total debts and the market value of a property when evaluating loan applications. Banks consider credit score when making a mortgage approval decision but that isn’t important to private lenders. Private lenders calculate the loan-to-value ratio of the property by dividing the total debts on a property by the appraised property value. Many of the private mortgage lenders in Sault Ste. Marie will not loan on a property that exceeds the maximum threshold of 75% LTV. Private mortgage lenders in Sault Ste. Marie are usually unconcerned with credit score but they avoid loaning to properties with high debt amounts. This is to ensure that they stand a chance of recouping their investment once a power of sale is finalized.
Private lenders have simple mortgage approval criteria. They require large down payments in the case of a new purchase. For example, a more traditional mortgage can be approved with as little as 5% down. Private lenders need to ask for a larger amount to offset any credit shortcomings. To keep in line with LTV requirements, most purchases will need to put down 30% to account for typical LTV requirements plus fees.
We like to make things simple here at Mortgage Broker Store. Most times, we use down payment or equity as our lending criteria. Some private lenders may consider credit scores, incomes, and employment. However, only a small portion of private lenders use income and other bank qualifiers in their approval criteria.
Reasons for Needing a Private Mortgage
When applying for the mortgage you will have to state why you need the money. Private lenders are very lenient, unlike banks that have many potential reasons to reject an application. The common uses of private mortgage money include:
- To pay for home repairs or renovation
- To pay school fees
- For living expenses until your salary arrives
- To pay off other high-interest loans
- To resolve a power of sale or stop a foreclosure
Homeowners who could not get a bank loan can turn to a private lender offering an alternative mortgage. Our network of private lenders in Sault Ste. Marie is ready to provide competitive private mortgages for their target clients. Being so flexible, private lenders can even design custom private mortgage solutions for each client.
Rapid Financing by Private Lenders
The major Canadian banks follow a comprehensive process of mortgage approval which cannot be sped up under any circumstances. This is a problem for people with an urgent need for funding. Private lenders are able to arrange a loan much faster with some providing the funds in only a week. Our lenders in Sault Ste. Marie also loans to people with real estate properties in other cities and towns across Ontario.
Information on Lenders in the Sault Ste. Marie Real Estate Sector
Sault Ste. Marie is located on the Canada/US Border. This city has a productive economy with several large employers such as the Ontario Lottery & Gaming Corporation.
For July 2022, 149 homes were sold in the city at an average price of $320,314. The city’s historically strong housing market makes it an ideal location for many private mortgage lenders to invest in. The total population as of 2021 was 72,051. The median household income is Sault Ste. Marie 61,020 dollars a year. The largest number of people in the area (4,320) have a household income between $60,000 and $79,000 a year. Statistics Canada updated numbers for April 2022 report most of the houses have 2 inhabitants (11,810). Four thousand six hundred and twenty-five homes have three people living in them.