Welland, Ontario is truly in the heart of the world-renowned Niagara region. 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 52,293 as of the last population census in 2016, the city provides an enviable backdrop in which to reside and enjoy all that the Niagara region has to offer.
Real estate numbers in Welland and the surrounding Niagara area are reflective of 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 March 2020, the average number of days it took to sell a single detached dwelling was 37. March 2021 saw this number shrink to an average of 16 days on the market.
Coupled with fast-moving inventory, the average price of a single detached dwelling in the Niagara region rose by a significant number to $620,700 in April 2021. This represents a 37.2% increase from April 2020. With increased house sales and steep appreciation in property value, the Welland market remains very robust. Very low borrowing costs and the desire of many stuck at home for the better part of last year to have more space are driving the Welland housing market and housing sales throughout the Niagara region.
What Lending Options Are There For the Welland Homeowner and Borrower?
For those that are current homeowners in Welland and for those that 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. With very low interest rates available in the first quarter of 2021, the banks can offer very competitive mortgage financing. 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 demonstrate full-time income as well as 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 Types of Private Mortgage Loan Options are Available?
When credit may be an issue and homeowners are looking to secure financing from Welland-based private lenders there are various lending options that will correspond to the degree of creditworthiness and the type/amount of household income of the borrower. Interest rates that private lenders will charge will also vary depending on your credit score and degree of equity in your home and the overall appraised value of your property. There are different reasons to take out secured mortgage options:
- Home Equity Line of Credit (HELOC)– This represents a revolving line of credit and can be used as needed. The Line of credit is based on the existing equity in your home.
- Home Equity Loan- A home equity loan will utilize the existing equity in your home. A lump sum is negotiated and monthly payments are made on a home equity loan. This loan is considered a second mortgage type and the funds can be used for different uses.
- Home renovation loans– Home equity can be used to take out a private home renovation loan. Funds can be put towards any renovations and fixes that will further increase your home’s market value and increase your enjoyment while living in your property.
- Bridge financing -If you require short-term financing for different reasons private bridge financing can help bridge the gap. Similar to most private loans, it is negotiated on a short-term basis. Most private loans are of term lengths between 1- 3 years.
- Negotiating new terms on your principal loan– Renegotiating some of the terms of your current primary mortgage can ease the financial strain and help to ensure mortgage payments do not fall into arrears.
- Debt consolidation loans– If managing multiple debt payments are straining the household budget, private debt consolidation loans can help roll these payments into one monthly debt payment. Debt consolidation loans can help increase your credit score if you make the payments in full and on time each month.
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.
- Bring a recent appraisal and proof of the degree of equity in your home if you are a current homeowner and looking to secure a second mortgage loan option.
What Criteria are Private lenders Looking for?
A private lender will weigh private mortgage financing on criteria which includes:
- The Loan-To-Value (LTV) 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 1,000,000 dollars, 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 the banks and credit unions who rely heavily on credit scores and 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 7% to 12% with any associated fees ranging between 3% to 6% of the final cost of the loan.
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 will be able to point you in the direction of 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 you are seeking a first mortgage to purchase a home or would like to tap into the existing equity in your home, private lending options are available to help make these mortgage goals achievable.