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.
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%.
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.
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?
- Costs Involved in A Private Lender Mortgage
- Welland and Niagara Region Stats
- Mortgage Broker Store Can Direct You Towards Suitable Private Mortgage Options