Home to the iconic Big Nickel, Sudbury is a thriving hub in Northern Ontario that combines urban amenities with the affordability and natural beauty of rural living. For homeowners in Sudbury, private mortgage lenders offer valuable financial options, allowing you to leverage your home’s equity for purposes such as renovations, debt consolidation, or investments, even if your credit history poses challenges.
Different Types of Mortgage Rates
The two most common types of mortgage interest rates are variable and fixed.
Variable interest rate mortgages have a floating interest rate set to the prime rate. This means that as interest rates across the lending industry change, so too will the interest rate of your mortgage.
Fixed-interest rate mortgages have a stable interest rate that does not change throughout the mortgage. This is the most common interest rate.
There are also adjustable-rate mortgages. These types of mortgages employ a fixed rate for one part of the loan’s term and a variable rate for the other. Most private lenders will charge a fixed interest rate for private loans.
What Lending Options Are Available for Sudbury Borrowers?
Most borrowers in Sudbury are aware of traditional lenders like banks and credit unions when looking to get a mortgage or use home equity, but they are not the only places to get loans in Sudbury. These lenders may put borrowers through rigorous stress tests to qualify for a mortgage, and those they deem to have poor credit are denied a mortgage loan.
Private lenders are an alternative to traditional lenders, offering fewer restrictions and faster loan approval. In Sudbury, private lenders are commonly used by self-employed borrowers with poor credit or trying to buy unusual or undeveloped land. Private lenders can work with you if a bank rejects your loan application.
Different Types of Mortgage Lenders in Sudbury
Mortgage lenders in Sudbury can be divided 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 they are a little more lenient 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 Is the Difference Between a Private Lender and a Hard Money Lender?
Private lenders and hard money lenders are the same. These terms represent non-traditional lenders who offer loans in exchange for equity. If the borrower fails to repay the hard money loan, the lender will use the equity as collateral. In other words, they will sell the property to get their money back in case of a default.
What Do Private Lenders Look For?
Private lenders need proof that you can pay off your loan. They also need to ensure that the loan you are taking out is not worth more than ¾ of the home you wish to buy or take a loan out on.
What Do Banks Look For?
Banks prefer full-time salaried employees as opposed to contract or self-employed income. Credit scores are weighed very heavily, and the banks require borrowers to have a credit score of at least 620 out of 900 to be considered. They have strict approval requirements but charge lower interest rates and fees than other lenders. Credit unions and trust companies also prefer traditional-based income and require strong credit scores to approve mortgages and other loans.
Private Mortgage Loans in Sudbury
Even if Sudbury homeowners have poor credit, private lenders can still approve their home equity loan. Other criteria will be assessed. If borrowers want loans in Sudbury, there are several private lending options available, including:
- Bad Credit Mortgages
- Home Equity Loans
- Home Equity Lines of Credit (HELOC)
- Second Mortgages
- Home Renovation Loans
- Bridge Financing
- Debt Consolidation Loans
- Reverse Mortgages (open to those 55 years of age and over)
- Renegotiated terms on a First Mortgage
With any of these loan options, a private lender will assess several key criteria, including the current appraised value of the home and the borrower’s equity in the property.
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%. If you’re a borrower with bad credit, you’ll find more information below.
Benefits of Private Loans
Private loans have some distinct advantages for borrowers in Sudbury:
- Private mortgage financing is often short-term (typically 1 to 3 years). This time allows the borrower to improve their credit score and payment history. Timely mortgage payments on a private loan boost your credit score, enhancing later eligibility for more favourable loans.
- Private mortgage loans are negotiated quickly and are straightforward. For debt payments or investments, private lenders offer secured mortgages and home equity loans faster than banks or credit unions.
- Private lenders consider affordability over credit score or loan type, enabling collaboration as long as borrowers can manage repayments.
- Private lenders can get your property quickly appraised to help you determine what kind of home equity loan you can expect, which is particularly useful for those considering debt consolidation.
- Despite credit scores, Sudbury homeowners with accrued equity can access cash through a home equity loan for various purposes. This money is versatile and usable for home renovations, debt consolidation, or financing personal milestones like weddings or vacations.
Data recorded by the Canadian Real Estate Association and the Sudbury Real Estate Board found that the average sale price of a home in Sudbury grew to $478,300, increasing by over 6.4% from May 2023 to May 2024. Homes may be appreciating quickly in Sudbury, but the housing market in the city is still the second most affordable in Ontario, and it has some of the lowest property taxes in the province.
How to Find the Best Private Mortgage Options in Sudbury
Overcome credit obstacles to buy a Sudbury home or access property equity without hindrance. As a seasoned private lender with decades of experience in Ontario’s real estate industry, Mortgage Broker Store has access to a broad network of private mortgage lenders in Sudbury. They leverage connections to find lenders, negotiating for the best deals to benefit their clients effectively.