Sudbury remains an attractive place to reside. Offering amenities for families and beautiful surroundings, Sudbury is the largest metropolitan area in Northern Ontario. With a population of 161,531 as of 2016 population rankings, the land area that encompasses Greater Sudbury represents the largest in Ontario.
When it comes to real estate, Sudbury is booming. For the last year, the average home price has appreciated by an astonishing 20.4%, according to recent statistics released by Sudbury Real Estate Board. House sales in March have increased by 84.1% compared to sales numbers in March 2020. In the first three months of 2021, sales are up by 53.4% compared to the first quarter of 2020.
It is common knowledge by now that mortgage interest rates on both variable and fixed mortgage types are at historically low levels. One of the lowest rates reported currently is 1.53% on a 2 year fixed mortgage type. With rates potentially this low, the number of Sudbury borrowers that may want to enter the housing market is increasing. So are current Sudbury homeowners that want to explore the option of taking out second mortgages on their properties by tapping into existing equity.
Real estate professionals are advising borrowers to consider investing in properties as appreciation has increased dramatically in the last year into the double-digit territory (some areas have seen appreciations northward of 30%.) With property gains in these numbers, it is very tempting to try to take out either principal mortgages on new properties or utilize equity to purchase secondary properties.
What Lending Options are Available for Sudbury Borrowers?
Most Sudbury borrowers are aware of the banks as a lending option when looking to take out the first mortgage or when looking to use equity to put towards a second mortgage option. What some may not be aware of is that there exist other well-established lending options for a Sudbury borrower/homeowner if credit is a barrier to bank mortgage financing. While the banks may put borrowers through rigorous stress tests to qualify for mortgage financing, those with poor credit are excluded from being approved for a mortgage loan. Other lenders may be able to overlook bad credit by looking at broader criteria. Mortgage professionals classify lender into three broad categories:
- A Lenders- Banks are referred to as A lenders. Criteria are often very stringent and narrow with borrowers routinely put through mortgage stress tests that require exemplary credit and substantial, easily demonstrated yearly based incomes.
- B Lenders- Credit Unions and Trust Companies are referred to as B lenders. Although a little more lenient as a rule than banks, yearly proven income and credit scores above 550 remain a requirement for mortgage approval.
- C Lenders- Private lenders are referred to as C lenders. Private lenders can lend out mortgage funds on an individual basis or may be part of a group of private lenders. There are also mortgage brokers that specialize in lending out private mortgage loans.
What Do Private Lenders Look For?
Banks can charge lower rates as well as charging minimal fees. This is only possible because the requirements for mortgage financing remain very rigorous. Credit scores are weighed very heavily and the banks prefer full-time salaried employees as opposed to contract or self-employed income. Credit unions and trust companies also prefer traditional-based income and require strong credit scores.
So where does this leave the Sudbury borrower/homeowner that has damaged credit or difficult to calculate yearly income? Private lenders can approve mortgage financing regardless of credit issues. Other criteria will be assessed. If a Sudbury homeowner is looking to utilize existing equity there several private loan options including:
- Home equity loans
- Home Equity Lines of Credit (HELOC)
- Home Renovation Loans
- Bridge financing
- Debt consolidation loans
- Renegotiated terms on a principal ( 1st mortgage)
With any of these loan options, a private lender will be assessing several key things which include the degree of equity existing in your property as well as the current appraised value in addition to any assets that can be demonstrated to determine the mortgage amount.
A private lender will typically attach an interest rate of between 7% to 12% depending on the type of loan that is being negotiated and the unique financial picture a borrower presents. Fees associated with most private loans tend to range between 3% to 6% of the loan’s total cost.
Private lenders will not lend out more than 75% of your property’s current value, which is referred to as a 75% Loan-To-Value (LTV). A private lender will also prefer to see 25% existing equity in your home. A loan with a higher than 75% LTV is deemed high-risk for a private lender.
When contemplating private mortgage financing you can do a few things to prepare:
- Know your credit score and try to increase your credit score before seeking pre-approval
- Gather all paperwork necessary including proof of income, investment statements, and proof of assets
- Research good pre-approval rates
- Be in contact with a broker for direction
Regardless of the type of loan that you may be considering, a private lender will be able to sit down with you and using a recent appraisal of your property look at different financing avenues that best suit your unique financial circumstances. Private loans have some distinct advantages for a Sudbury homeowner/borrower:
- Private mortgage financing is on a short-term basis (typically between 1-3 years). This time will provide the opportunity to restore credit and prove a reliable payment history. By paying the mortgage payments on time and in full for the course of the loan, your credit score will improve.
- Private loans are negotiated quickly and the process is straightforward. If financing is necessary to pay for immediate expenses or money is needed to help make a payment towards a principal mortgage, private lenders can provide secured mortgage loans faster than the banks/credit union. The loan process is simple and will be finalized quickly.
Mortgage Broker Store Will Help Direct You Towards Private Mortgage Options
Don’t let credit issues stand in your way of purchasing a home or taking out hard-earned equity from your property to pay for needed expenses. Mortgage Broker Store has access to a broad network of private lenders in the Sudbury area. A private lender will be able to sit down with you and discuss your options directly which will help you achieve your mortgage goals.
Private Mortgage Rates for October 2021