Making ends meet during COVID-19 can be a monumental challenge. The good news is that you are not alone. Private mortgage lenders in Toronto can help you get back on your feet.
If you need money, private mortgage lenders in Toronto are looking to invest.
The City of Toronto is the economic heart of Ontario and the most populous city in Canada. In the past year (2019 to 2020) Toronto’s population grew by 45,742 persons, making it the fastest growing of all cities in Canada or the United States. Toronto’s population continues to grow, and in spite of the pandemic, the housing market also continues to expand at a healthy rate.
According to the Toronto Regional Real Estate Board, the average selling price of a residential home in the Toronto region increased 16.9 percent from $806,971 in 2019 to $943,710 in July 2020.
The Toronto region housing market is on fire with no signs of cooling down and private mortgage lenders have taken notice.
The economic consequence of the pandemic is that many individuals have lost income due to temporary layoffs or reduced hours of work, putting a strain on their ability to pay their debts. Private mortgage lenders in Toronto can help provide the financial flexibility needed to manage these financial pressures during, and after COVID 19 through private loans.
What is a Private Mortgage Loan?
Like any private loan, a private mortgage loan is a loan from a private lender that is secured or guaranteed by the borrower’s real estate.
A private lender is an individual, company or business that lends money. Private lenders are not associated with banks or other financial institutions.
Most private mortgage loans do not require payments to be made on the principal amount of the mortgage. When this is the case, there is no financial penalty for holding off on principal payments. The only requirement is that interest payments are made, which leads to lower monthly payments. This arrangement can be very useful for individuals who do not have a steady or guaranteed monthly income.
For many people dealing with the pandemic and its impact on their incomes, the advantage of a private mortgage loan is that these individuals can delay making principal payments on their mortgage when cash flow is low. When their incomes return to “normal”, they can start making payments on the principle again.
As with any loan, it is important to carefully read the details of the private mortgage loan agreement and make sure that the required payments can be made.
It is important to remember that private mortgage loans are secured by real estate. That means the borrower must have equity in a property in order to get this loan. Failure to make payments will result in the private lender using power of sale to seize and sell the borrower’s property in order to get their money back. In some cases, the borrower may be able to stop a power of sale from happening. For more information go to how to prevent power of sale.
What Mortgage Rates and Fees Should I Expect on My Private Loan?
Most private mortgage lenders in the Toronto area charge fees of 1 to 3 percent of the total value of the loan or mortgage.
Private mortgage lenders typically charge interest rates between 7 and 15 percent interest, however, these rates can change depending on the type of property being used to secure the loan.
The interest rate may also depend on your annual income, credit history and credit score. The lower your credit score the more likely you will be charged a higher interest rate.
Criteria to Qualify for a Private Mortgage Loan
To qualify for a private mortgage loan in Toronto you need to own or have equity in real estate, such as your house or condominium.
Equity is the portion of the property that you own and have already paid off. For example, if your home is worth $1,000,000 and the remaining mortgage balance is $750,000, then you own 25 percent equity in the property.
A private lender looks at the relative amount of equity you have in the property. For example, if you own your property without any mortgages, then the private lender will consider lending you up to 75 percent of the market value of that property. The remaining 25 percent represents the homeowner’s equity.
How to Qualify for a Mortgage Loan Using Your Home
Private mortgage lenders in Toronto can approve a loan that is no higher than 75 percent of the home’s market value. This means that to qualify for a private mortgage loan on your own residential property, you need at least 25 percent equity in your property.
For example, if your home is worth $700,000, and a private mortgage lender approves a loan worth 75 percent, you would be eligible for a $562,500 private loan.
Remember that 75 percent is the maximum amount of mortgage loan you can borrow for your home, but you do not have to borrow the full amount. Think about what you need and decide accordingly.
How to Qualify for a Mortgage Loan Using Your Rental Property
Borrowers who own or have equity in rental properties can obtain a loan from a private lender for up to 75 percent of the market value of the income property.
It is worth noting that most private lenders will require rental properties to have a strong cashflow to be considered for a loan to value ratio of 75 percent.
The money borrowed can be used for any purpose.
How to Qualify for a Mortgage Loan Using Your Commercial Property
Private mortgage lenders can authorize loans up to 65 percent of the commercial property’s market value. Lending for commercial lending is generally more complex as lenders will also look at the nature of the business that occupies the property. The businesses must have a positive cash flow and any environmental concerns (I.e., fuel spills from the gas station) must be examined and remediated if necessary.
Why Would I Want a Private Loan?
Unlike banks and other major financial institutions, the only requirement to obtain a private loan is equity in a property. For borrowers with a poor credit history and credit score, a private loan may be the only way to get funds.
Private lenders in the Toronto area can supply funds for a wide range of uses, whereas many banks and other financial institutions approve loans for specific uses such as mortgages or car loans.
Private loans often get approved in a short period of time, sometimes as quickly as two weeks. This is optimal for borrowers who need money on short notice.
Common Reasons for Using a Private Loan
Private lenders are private sector businesses and individuals who specialize in working with riskier borrowers. When the banks can’t help you, you can still turn to private mortgage lenders. If you own a home or equity in it and you live in the Toronto area, you have a good chance of finding a private mortgage lender and getting a private loan.
The following lists some of the more common reasons people get private loans:
- Financial investments
- Paying bills
- Debt consolidation
- Loan denial from banks due to unconfirmed income
- Loan denial due to self-employment
- Retired and ineligible for loans from other lenders
- Purchase property banks won’t finance
- Low credit score
- Poor credit history or lack of credit history
What Interest Rate Will I Have to Pay?
Your interest rate will depend on several factors such as your income, credit score, credit history, condition of the property which you are using to secure the loan, and the type of private lender you choose.
Your income, credit score and credit history won’t affect your eligibility for a private loan, but it can affect what interest rate a private lender will charge. The higher your income or credit score, the better the interest rate.
Each private lender will evaluate your level of risk as a borrower, primarily your ability to pay back the private loan. The longer and better the credit history, the better the interest rate.
Private lenders will assess the property that you propose to secure for the loan. The higher the market value or the better the condition of the property, the better the interest rate.
As with any investment, the higher the level of risk, the more an investor will expect to earn. The more risk a private lender has to take on, the higher the interest rate.
How Long Will It Take for My Private Loan to be Approved?
Private mortgage lenders can approve loans within 24 hours and get you cash in as little as two weeks.
This timeline might not be the same for every borrower. Approval time for your private loan can vary depending on several factors including whether the private lender is an individual or a large firm that has many other loan requests to process.
Finding a Private Mortgage Lender in Toronto
So, you have decided to start looking for a private mortgage lender for a loan, but how do you find the right lender?
Finding a private mortgage lender is a significant challenge because most private lenders do not advertise or maintain an active public profile.
Your ability to identify and compare the kinds of loans offered by different private lenders is vital to making an informed decision.
A staple in the Ontario lending industry for over a decade, the Mortgage Broker Store manages an extensive network of private mortgage lenders in the Toronto area. The principal broker, Ronald Alphonso, is also a direct private mortgage lender. You can access this network and speak with a private lender or mortgage broker directly.
Get information and advice on private lending, mortgage interest rates and fees, real estate in Toronto and anything else you need to make the right choice.
A broker at the Mortgage Broker Store can connect you with private mortgage lenders in the Toronto area. The broker can explain terms, conditions, and offer an objective analysis of your financial situation.
The Mortgage Broker Store is now offering one-on-one consultations for free, so anyone can learn about what their options are.