Due to the strict nature of bank lending requirements, getting a bank mortgage can be very difficult. For those rejected by banks, using a private mortgage lender in Vaughan offers a viable alternative to secure the needed funds. Vaughan private lenders are also unaffected by legislation targeting other lending institutions like banks and credit unions. Private lenders have more relaxed lending rules and can lend money when banks won’t.
With the value of homes at some of the highest levels ever, homeowners in the city can tap into their growing home equity with the help of a bank or a private mortgage lender in Vaughan.
What Are Private Lenders?
Private lenders are individuals or companies that lend money for profit. Since Vaughan is an up-and-coming city with a growing population and strong economy, private lenders are willing to lend money to borrowers in the region. Private lenders in Vaughan can provide loans worth millions for many years or loans as small as $30,000 for one-year terms.
These lenders will provide funds in exchange for equity, usually a home, but also cars, plots of loans, and other high-value assets. Securing mortgage loans with property reduces the risk of default, as the property can be sold to recoup any losses.
Common Reasons for Needing a Private Mortgage
Before a private lender provides financing, they will ask why it is needed. There are many valid reasons for needing private lender financing. Some of the most common reasons are:
- Paying off high interest debts
- Making property repairs
- Renovations
- Loss of employment
- Stopping Power of Sale or Foreclosure
- Getting additional education
Many will turn to private lenders for debt consolidation loans. These mortgage loans can be large enough to pay off all the borrowers’ debts and replace them with an easy-to-manage loan with a much lower interest rate than credit cards. This private mortgage loan helps borrowers eliminate debt and save money from reduced interest charges.
Fast Private Mortgage Loans
Canada’s major banks have a lengthy and in-depth mortgage approval process that can take months to complete. These institutions cannot expedite their processes, potentially causing complications for time-sensitive real estate deals. Some real estate deals may collapse without prompt financing, making a private lender more appropriate.
Private lenders can meet tight deadlines, often finalizing loan agreements within a week of starting the application process. This can make them particularly useful for borrowers who need quick access to funds.
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%.
Why Private Lenders Invest in Vaughan Real Estate
Vaughan boasts Canada’s first smart hospital, abundant green space, large homes, low crime, a booming industry, and over 19,000 businesses. Its population grew by 5.5% from 2016 to 2021, surpassing 400,000 in 2022, and it shows no signs of slowing down. As one of Canada’s most livable cities with a fast-growing population, Vaughan’s real estate market has been experiencing a boom throughout the past decade. In April 2024, the average price for a home in Vaughan, Ontario, reached $1.28 million, according to the Toronto Regional Real Estate Broad (TREBB).
Many live in Canada’s 17th largest city for job availability and proximity to Toronto. This has helped fuel demand for housing, creating a red-hot real estate market. This boom is not limited to Vaughan alone. Neighbouring communities like Kleinburg and West Woodbridge have also experienced fast-growing real estate markets during the same time period. In Kleinburg, home prices grew from $949,000 to 1.8 million from August 2012 to 2022, while West Woodbridge home values jumped from $435,000 in 2012 to $1.1 million in August 2022.
If you own a home in Vaughan or surrounding communities, you can work with private mortgage lenders to take advantage of your home’s growing equity and tap into your accrued wealth. Those seeking private lenders are often rejected by major banks due to strict income and credit score requirements.
How to Find Private Mortgage Lenders in Vaughan, Ontario
Private lenders typically do not advertise widely; most people learn about them through word of mouth or research. Search ‘private mortgage lenders Vaughan’ or ‘private mortgage lenders in Ontario’ on Google to find potential lenders to work with.
Another way you could find private lenders in Vaughan is by working with an experienced broker like the team at Mortgage Broker Store. With over a decade in Ontario’s real estate, we’ve built a network of private lenders across the province. We have a network to connect you with lenders who offer the most advantageous loan deals you need. As a direct private lender, we offer financing options if no better deal is available elsewhere.