It can be discouraging. Approaching big banks is more difficult now than ever before. Historically, obtaining a mortgage has been a straightforward process. In the last few years, however, the “stress test” for meeting the stringent criteria put forth by the banks has been increasingly harder to pass for many borrowers.
Mortgage Broker Store can provide solutions for those that may be turned away from the banks. We can facilitate mortgage loans of differing types, as well as other short-term financing options. Approval is shorter in duration, straightforward, and based on border criteria than the narrow loan criteria set forth by the banks.
Quebec borrowers can use their property as collateral to obtain private mortgage loans. All sources of income will be considered when borrowers apply for short-term loans for immediate needs such as home renovations or consolidating high-interest credit card debt.
Approval Criteria for Quebec Private Lenders
In Quebec, as in the case of the rest of the country, the banks may require exemplary credit and full-time salaried employees before approving loan applications. Private lenders will look to different criteria including:
- 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 has built up in the property. Typically a private lender will loan up to 65% of the determined value of a property. If your property is 1 million, a private lender will lend up to 650,000 which represents 65% of the value of the property.
- 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.
- 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.
Types of Lenders in Quebec
In Quebec, as in other provinces within Canada, borrowers will be able to approach lenders that fall into one of three broad categories including C lenders which represent Private Lenders. Let’s take a closer look:
- 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 funds, as part of a private lending syndicate with pooled investment money for a mortgage and short term financing. 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.
What Paperwork Will Be Required?
When applying for a private mortgage loan or other short term private loan, you will need to supply a standard assortment of documents. In addition to the required documentation, other variables will be looked at including the equity that is built up in your home, and all sources of income that you can prove. Your property will be used as collateral when securing a mortgage loan. As well, other demonstrated assets will be taken into consideration in the loan application. Paperwork will generally include:
- Any recent Notice of Assessments-as reference for the private lender to help in the overall determination of available income sources.
- Your current credit report– although not as reliant on credit as the A and B lenders, credit history is still included in the application process.
- Proof of property taxes- Bring with you your most recent property tax bill.
- Any mortgage recent mortgage statements that you have– These statements can include any 1st, 2nd, or 3rd mortgage statements if you are applying for additional mortgages on your existing property
- Any proof of investment income- investment income will be included in the overall assessment of yearly sources of income.
- List of existing assets– estimation of assets will come to play in the overall determination of loan eligibility.
Let Mortgage Broker Store Help you Achieve your Financing Goals- A List of Private Lenders in Your Area
Quebec borrowers face the same hurdles as other borrowers across the country. Private lenders in Quebec offer the same attractive advantages and help to fill the gap the banks have left wide open. Using property as collateral, assessing other assets, all sources of income including investment income, and limiting the emphasis on Beacon Scores, Quebec private lenders offer many options for the Quebec borrower.
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.