Strict government regulations on banks in Canada lead people to the less regulated private lenders. Most of the private mortgage lenders in Sudbury exclusively service hard to place mortgages that have been turned down by the banks. They can do this because they do not follow the same rules as banks and if you have been turned away by banks, you can get help from private lenders in Sudbury. Private lenders give clients a chance to leverage the equity in personal assets for personal gain; credit score regardless.
Mortgages from Private Lenders in Sudbury
Sudbury private lenders prefer giving loans as registered mortgages against real estate. The Ontario Mortgage Act allows holders of registered mortgages to sell off the property if the borrower is unable to pay agreed mortgage fees. The loan may be as little as $20,000 for a one-year period unless the applicant requests otherwise. For riskier mortgages, fees and interest rates charged are usually higher than those for bank mortgages. The private lenders are interested in real estate property, which they use to generate profits. Sudbury real estate market is attractive as it boasts some of the highest real estate appreciation rates in Ontario.
Approval Criteria for Private Mortgages
Private lenders are keen about market value and existing debts on a property when deciding whether to approve mortgage applications. Banks usually rely on credit score to inform their lending decisions but that doesn’t seem to bother private lenders, who rely on loan to value instead. Also known as LTV, this metric helps private lenders decide on which properties to loan. It is obtained by calculating the value of all mortgages by the appraised price of the house. If a property is worth $1,000,000 and has debts of $700,000, the LTV is 70%, which could get you a good deal on a private mortgage. The private lenders servicing Sudbury can only loan to a property with 75% LTV or less. While they don’t have much regard for credit score, private lenders are also sensitive to risk and tend to avoid properties with a heavy debt burden.
Reasons for Needing a Private Mortgage
The private lender will require you to state your reason for needing the money but don’t worry as they are quite lenient. They tend to accept nearly every reasonable explanation and some popular responses include:
- To pay for home upgrades or repairs
- To pay tuition fees for university or college
- To cover living expenses after being laid off work
- To pay off high-interest loans
- To stop foreclosure of power of sale
Those who fall below the bank requirements for loans are the target clients for private lenders. Our network in Sudbury can provide private mortgages to people who were rejected by banks when they badly needed loans. This makes it possible to actualize financial obligation in spite of a bad credit history.
Faster Financing by Private Lenders
The strict rules on banks lead to a long mortgage approval process that cannot be sped up in favour of the clients’ situation. This can be a problem when people require money urgently in order to facilitate the sale of a property. Private lenders can provide money much faster than banks and if needed, they can provide funding in as few as 24 hours. This would be ideal especially when the borrower needs funds to stop a power of sale or foreclosure. Owing to great flexibility, private mortgage lenders in Sudbury can create custom loan solutions for every customer. Private lenders in our network can lend on property in Sudbury and all other cities in Ontario, Canada.
Information on Lenders in the Sudbury Real Estate Market
Sudbury is located in Ontario province on Canada’s border with the U.S. The general real estate market of Ontario is the subject of much debate as its cities and towns have experienced major growth in real estate over the last couple of years. Many residents of Ontario are fast taking up real estate lending as a means of spare income generation. Ontario is famously known as an economic powerhouse in Canada and in addition to that, it has received accolades as one of the best places to reside in Canada.
Of all the different types of lenders, private mortgage lenders have the most lenient approval criteria. Private lenders will generally provide mortgages up to 75% of the value of the property. Most private lenders can only offer mortgages on typical residential homes worth at least $100,000. The ratio between the value of the requested mortgage and the value of the property is called a “Loan-to-Value” (LTV) ratio and is the main factor when it comes to approval on a private mortgage. These criteria are different from those of Banks, Trust Companies, and Credit Unions, which will also consider a borrower’s income ratios, employment, and credit score in addition to their LTV ratio. Private lenders are usually not concerned with the creditworthiness of the borrower.
Since private mortgages are considered to be a high-risk investment, these lenders demand higher rates and fees. A borrower can expect to pay rates between 7% to 12% and fees equal to 4% to 6% of the mortgage amount. The rates are dependent on the LTV ratio, while the fees are dependent on the complexity of the mortgage, which includes the cost of dealing with any legal issues. Approval can also depend on the location of the property, and in general, larger cities will have higher maximum LTV ratios. This rate estimation tool will take into account all of these factors and estimate what interest rate you can expect to pay for a mortgage.
Private Mortgage Rates for January 2021