Canadian banks are government-regulated. The rules placed on these institutions discourage many 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 loans that more traditional institutions reject include bad credit mortgages. There are other unique reasons to use one of these services, including stopping a power of sale or foreclosure. Discover more about private mortgage lenders in Sault Ste Marie.
These experts can help stop either process, but the homeowner needs to have sufficient equity. Many private lenders can approve a mortgage for homeowners facing a power of sale or foreclosure. However, the total value of the mortgage cannot usually exceed 75% of the property’s 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 compared to traditional lending institutions.
Private Mortgage Lenders in Sault Ste. Marie
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 lends money in the form of registered mortgages on the property. The registered mortgage agreement allows the lender to sell the mortgaged property if mortgage payments are not paid. A private lender will lend as little as $30,000 for one year. People with limited income can opt for “pre-paid mortgage payments,” which means the borrower is given extra funds used to pay the monthly mortgage payments.
Riskier mortgages attract higher fees than bank loans because lenders must cushion themselves from losses if they default on payments. Some fees are required to pay real estate lawyers and appraisals, 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?
Most people who borrow from a private lender have experienced significant life events that impacted their earning potential, such as job layoffs, divorce, or a death in the family. Private mortgages are usually too expensive for long-term solutions, so borrowers often need an exit strategy. The most common ways to repay a private mortgage are obtaining a new, cheaper mortgage or selling the property. Most people prefer to keep their homes and will work on improving their credit and employment situation to qualify for a bank mortgage. Those whose situations do not improve usually sell or borrow from family to pay off the private lender.
Reasons for Needing a Private Mortgage
When applying for a mortgage, you will have to state why you need the money. Private lenders are very lenient, unlike banks with many potential reasons to reject an application. The common uses of private mortgage money include:
- Home repairs or renovations
- School fees
- Living expenses until your salary arrives
- Paying off other high-interest loans
- Resolving a power of sale or stopping a foreclosure
Homeowners who cannot 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 Mortgage Lenders in Sault Ste Marie
Major Canadian banks follow a comprehensive mortgage approval process that cannot be expedited. This is problematic for people with urgent funding needs. Private lenders can arrange mortgage loans much faster, with some providing funds within a week. Our lenders in Sault Ste Marie also loan to people with real estate properties in other cities and towns across Ontario.
Costs Involved in A Private Lender Mortgage
Private mortgage lenders are more expensive than any other type of mortgage lender. There are no standard costs, but most lenders try to offer rates and fees that are competitive with other lenders. Here are some costs to expect as of December 2024:
- Interest Rates: Typically between 8% and 12%
- Lender Fees: Usually between 2% and 4%
- Broker Fees: Set to match the lender fees, which are usually 2% to 4%
- Appraisal Fee: $500 + HST for single-family homes in Ontario. Larger or unconventional properties will cost more.
- Legal fees: These range from $1,000 to $3,000, depending on the mortgage request.
How LTV Affects Costs
The Loan-to-Value (LTV) ratio plays a big role in determining your costs. Simply put, the closer your mortgage is to the lender’s maximum allowable LTV (typically 75%), the higher your rates and fees. Lenders see higher LTVs as riskier, so they charge more to compensate. Calculate this ratio by taking all existing mortgages plus all proposed mortgages and dividing by the appraisal value.
Here’s an example of how costs can vary based on LTV:
| LTV (%) | Interest Rate (%) | Lender Fees (%) | Broker Fees (%) |
| 50% | 8% | 2% | 2% |
| 60% | 9% | 3% | 3% |
| 70% | 11% | 3.5% | 3.5% |
| 75% | 12% | 4% | 4% |
What You Need to Know About Fees
Your mortgage amount includes specific fees, such as lender, broker, and legal, which are included in your mortgage amount and count toward the LTV. If your request is already at 75% LTV before fees are added, you might exceed the limit and not get approved. Appraisal fees are typically not included in the LTV and are paid by the borrower directly after the inspection is performed.
A good mortgage broker will provide documents that clearly outline all costs related to the mortgage, and whether or not they are included in the mortgage amount. Reviewing the costs with your broker is always a good idea to make sure they fit your financial plan.
When applying for private mortgage lenders in Ontario, you must state why you need the money. Private lenders are usually lenient and will accept the most reasonable responses.
Some popular responses include:
- To pay off high-interest credit card debt
- To pay for home repairs or renovations
- To cover living expenses after a work layoff
- To stop a power of sale or foreclosure
- To pay tuition fees for college or university
In many cases, borrowers approach private lenders for mortgages and loans to help consolidate existing debt or prevent property loss through foreclosure or power of sale proceedings. Many people juggle multiple types of debt at once. For example, as noted above, you might have a mortgage and a significant amount of credit card debt or outstanding student loans. Since mortgage and student loans are owed to different collectors, you may have to keep track of multiple monthly debt payments. A mortgage from a private lender can be enough to pay off what remains on your mortgage and your student loans. Upon settling individual debts, you’ll have a monthly payment to your lender, simplifying your financial obligations. Many borrowers find this an easier way to manage debt.
People who cannot qualify for a low-interest rate loan at a bank are the kind of clients that private lenders seek out. Our private lender network can provide mortgages to people turned down by banks. Most private lenders will offer a rate between 8% to 12%.
Information on Private Mortgage Lenders in Sault Ste Marie Real Estate Sector
Sault Ste Marie is located on the Canada/US Border. It has a productive economy and several large employers, such as the Ontario Lottery & Gaming Corporation.
In June 2024, 161 homes were sold in the city at an average price of $305,000. The city’s historically strong housing market makes it an ideal location for many private mortgage lenders to invest. The total population as of 2021 was 72,051. The median household income in Sault Ste Marie is $61,020 per 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 the numbers for April 2022, reporting that most houses have two inhabitants (11,810).
- Introduction
- Private Mortgage Lenders in Sault Ste. Marie
- Mortgages from Private Lenders
- How Do You Pay Back a Private Lender?
- Reasons for Needing a Private Mortgage
- Rapid Financing by Private Mortgage Lenders in Sault Ste Marie
- Costs Involved in A Private Lender Mortgage
- Information on Private Mortgage Lenders in Sault Ste Marie Real Estate Sector