Canadian banks operate under strict government regulations, making it challenging for borrowers to secure mortgages and loans across Ontario and Canada. While some individuals may still qualify for bank mortgages, many do not meet the rigid criteria. In Welland, those who cannot obtain financing from traditional banks have an alternative: private mortgage lenders.
Private lenders are not bound by the same regulations as Welland’s banks, credit unions, trust companies, and other institutional lenders. They often assist individuals who have been turned down by these conventional institutions.
Banks typically require borrowers to have a very high credit score to qualify for financing, generally favoring applicants with a credit score above 620 points. This requirement alone disqualifies many residents across Ontario. In contrast, private lenders in Welland do not rely on credit scores to decide which mortgage applications to approve. Many specialize in providing bad credit mortgages for borrowers with scores below 620.
For those in Welland looking to secure a mortgage with low credit or access additional funds, private mortgage lenders offer a viable solution to obtain the mortgage loans they need.
What Lending Options Are There for the Welland Homeowner and Borrower?
For current homeowners in Welland and those who wish to borrow to profit from such a healthy housing market, it can be daunting sorting through what lending options are available. In the mortgage, industry lenders tend to be classified into three broad categories:
- A Lenders– These lenders are represented by the banks. A lenders can do this because the criteria that are required for homeowners/borrowers are very stringent. Banks will demand near-perfect credit, substantial and easy-to-describe full-time income, and a low debt ratio to approve mortgage loans. Generally, the banks will lend out long-term amortized mortgages as these loans are deemed quite low-risk. If a borrower is not able to come up with a 20% down payment, the Canadian Housing and Mortgage Corporation will provide mortgage insurance to mitigate risks for the banks.
- B Lenders– These lenders are represented by trust companies and credit unions. Although these lenders can provide mortgage financing for credit scores less than what the banks demand, B lenders will still prefer to see substantial household income, additional assets, and a credit score of at least 550.
- C Lenders– These lenders are represented by private lenders. Private lenders can offer secured mortgage financing to Welland homeowners/borrowers based on their borrowing needs. Private second mortgage options are available for a currency homeowner in addition to principal (first mortgage) financing. C lenders can overlook credit issues by looking at the equity built in a property, the current appraised value of the property as well as income, sufficient down payment (if applying for a primary mortgage), and any additional assets to leverage the mortgage loan against.
What Steps Can Be Taken Before Applying for a Private Mortgage Loan?
- Consider a pre-approval if you are applying for a principal mortgage.
- Be very familiar with your credit score and credit report.
- Research private lending options in your area.
- Arrange to sit down with a private lender.
- Know what type of loan you feel would address your short-term financial needs.
- Gather all relevant paperwork.
- If you are a current homeowner looking to secure a second mortgage loan, bring a recent appraisal and proof of the degree of equity in your home.
What Criteria Are Private Lenders Looking For?
A private lender will weigh private mortgage financing on criteria which include:
- The Loan-to-Value (LTV) ratio by assessing a recent appraisal of your property.
- The overall debt ratio of a homeowner/borrower and any existing assets.
- The degree of equity that exists in your home. Generally, a private lender will prefer to see at least 25% equity built in your home.
As a rule of thumb, a private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). If your home is worth $1 million, then a private lender will not lend more than $750,000, which represents 75% of the total value of your home. Private lenders will also factor in a borrower’s credit and salary.
Poor credit and self-employed or contract-based salary will not stand in the way of private mortgage financing, unlike banks and credit unions, which rely heavily on credit scores, creditworthiness, and traditional income types.
The interest rates charged by private lenders tend to be higher than the banks routinely change. Banks can afford to do this because mortgage loan approval depends heavily on near-perfect credit. If your credit is poor, private loans are available to provide short-term mortgage financing. Interest rates will be between 8% and 12%, with any associated fees ranging between 3% to 6% of the final cost of the loan.
Welland and Niagara Region Stats
Real estate numbers in Welland and the surrounding Niagara area reflect the desire for many to buy into the Welland area. Local housing statistics also mirror a significant upward trend throughout Ontario during the last 17 months. According to the Niagara Association of Realtors, house demand has outstripped available inventory. In June, the Niagara Association of REALTORS® listed 1460 residential properties compared to 1403 in June 2023. The average days it took to sell a home in June 2024 was 36 days, a 20% increase from June 2023.
The MLS® Home Price Index (HPI) tracks price trends more accurately than possible using average or median price measures. The overall MLS® HPI composite benchmark price for the Niagara Region was $651,800 in June 2024. This was a 2.3% decrease from June 2023. Low borrowing costs and the desire for more space drive the Welland housing market and Niagara region sales.
Dubbed the Rose City due to the abundance of roses grown in the Welland area, the city offers unparalleled natural beauty and attractions, such as Niagara Falls, within an easy 30-minute drive. With a population of 55,750 as of the last census in 2021, the city provides an enviable backdrop to reside and enjoy all that the Niagara region has to offer. Read on to discover more about private mortgage lenders in Welland.
Mortgage Broker Store Can Direct You Towards Suitable Private Mortgage Options
At Mortgage Broker Store we have access to a network of established Welland and Niagara-based private lenders. We can determine the type of mortgage financing that will suit your financial objectives. We can direct you to a private lender to help negotiate terms on a secure mortgage loan option.
Poor credit does not have to stand in the way of securing mortgage loans. Whether seeking a first mortgage or tapping into home equity, private lending options can help achieve your mortgage goals.
Looking for expert guidance in navigating the world of private mortgage lending in Ontario? Look no further than Mortgage Broker Store. Jonathan Alphonso and our team specialize in connecting clients with the perfect private lender tailored to their needs. Whether you’re seeking a first mortgage, second mortgage, or specialized loan, we’ve got you covered.
- Introduction
- What Lending Options Are There for the Welland Homeowner and Borrower?
- What Steps Can Be Taken Before Applying for a Private Mortgage Loan?
- What Criteria Are Private Lenders Looking For?
- Welland and Niagara Region Stats
- Mortgage Broker Store Can Direct You Towards Suitable Private Mortgage Options