When it comes to the process of lending, Manitoba borrowers are afforded more options than they may be aware of. Typically, when looking to secure financing, whether it be for a mortgage for a given property or other short term financing needs, borrowers believe that the banks are the only option to provide various types of loans.

While the banks do lend out mortgages on a regular basis, it is becoming increasingly difficult to meet their often stringent loan criteria. The “stress test” that the banks require borrowers to pass in order to qualify for financing is more difficult now than ever before.

Mortgage Broker Store understands the unique challenges facing the Manitoba based borrower and has an established network of Private Lenders to help. It may seem there are too many hoops to jump through, and the length of time it takes to be approved for a short-term mortgage makes the process difficult for many. It is important to know that in Manitoba borrowers have more options available to them, including private lending options. 

Manitoba Borrowers Can Look to Three Types of Lenders – Let’s Look at Them

  • A Lenders– Many borrowers are aware of only major banks as a lending source when contemplating applying for a mortgage. These big banks are considered to be A lenders. They will loan out mortgages to borrowers with exemplary credit and to usually long term salaried employees. The “stress test” that borrowers are subjected to is very stringent. loans are approved based on credit scores of 700 and over and sufficient proven yearly salary. A Lenders will usually be able to charge 2% on loans with minimal fees
  • B Lenders– These lenders represent Credit Unions and Trust Companies. Although borrowers will be assessed on similar criteria to the big banks, including base yearly salary and creditworthiness, these lenders will accept a lower overall credit ( beacon score) than their A lender counterparts. A Trust Company or Credit Union will accept a score of 600 if the salary is deemed sufficient. B Lenders will usually charge between 4% and 6% on loans. Borrowers should expect to pay ½% in fees.
  • C Lenders– These lenders represent private lenders. Private lenders can loan out on their own with their personal funds, as a group in a mortgage syndicate, or as a pool fund operating as a mortgage investment corporation (MIC). Private lenders will be able to look past credit obstacles and approve self-employed or contract employees. Fees will be higher, typically 3% to 6% of the overall loan, and will generally charge anywhere between 7% and 12% interest on these loans.

Private lenders (C lenders) provide an avenue for Manitoba lenders to obtain short financing in a relatively short processing time and with fewer restrictions than are often imposed by A lenders. What will private lenders require then to qualify for a mortgage loan or other short term financing applications?

What Criteria are Manitoba Private Lenders Looking for When Determining Loan Eligibility?

  • Appraisals on existing properties– when applying for financing, your home will be used as collateral on which to secure your loan. Private lenders will rely heavily on appraisals of your property to determine the market value of your home.
  • Assessing the Loan to Value (LTV) of your existing property– If you are applying for a second or even third mortgage on an existing property, a  private lender will calculate the LTV to determine how much equity is built up in the property. Typically a private lender will loan up to 75% of the determined value of a property. If your property is 1 million, a private lender will lend up to 750,000 which represents 75% of the value of the property.
  • All sources of income- private lenders will look at all sources of income from a borrower including self-employed income, spousal and child support, investment income, and even child tax credit. Make sure to supply your Notice of Assessment (NOA) for the last three years as well as documentation proving other sources of income.
  • Larger down payment- to compensate for less than desirable credit, a private lender will likely require a larger down payment if applying for a first mortgage for example.

Advantages of Private Lending Options 

When exploring the various lending options, it is important to compare the advantages of lending privately as opposed to through the banks. Advantages include:

  • Faster approval times– Private lenders can offer mortgages to borrowers that would otherwise be turned away by the banks due to poor credit or being self-employed/contract employees. Furthermore, loans are processed generally faster and without such stringent criteria.
  • Short term financing options-  Private lenders can offer different short term financing options including Home equity Lines of Credit (HELOCs), Home Improvement Loans, Bridge Loans, and consolidation loans.
  • Take into account other criteria to offset poor credit– When determining eligibility for financing, private lenders will assess differing criteria to negate poor credit. Private lenders will assess all income including self-employed income, investment income,  monthly spousal and child support, and even demonstrated monthly child tax credit. Other assets will be taken into consideration as well as appraisals on the existing property if applying for a mortgage loan. 

The advantages of looking at private lending options in Manitoba are clear. If you have poor credit, are self-employed, making yearly income harder to prove, or are looking for quick and relatively hassle-free short term financing, private lenders can be the best lending option. With flexibility, hassle-free processing, and broader terms to base financing on, private lenders can offer attractive lending possibilities for the Manitoba based borrower.

Let Mortgage Broker Store Help you Achieve your Financing Goals- A List of Private Lenders in Your Area

Like any Province, Alberta has unique aspects that influence the decisions of private lenders. Typically, because private loans often use your property as collateral, private lenders will more than likely peter to leverage mortgage loans against urban properties, as opposed to a rural property. Keep this in mind when applying for first, second, or even third mortgages on a given property. Location is always top of mind when private lenders are determining financing options.

Mortgage Broker Store understands the needs of the borrower and we are always striving towards finding the best match when looking at your particular mortgage and financing needs. We work with a network of private lenders across the country and are more than happy to guide you in important decisions that you will be making during the private lending process. 

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