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Most Canadians are not familiar with the concept of private mortgages. Private Mortgages help to fill the gaps that institutions like the big banks, are simply unable or unwilling to fill. We’ve included some fast facts for you to browse below.
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Why should I use a private lender?
You might not be able to qualify for a loan from your local bank or lending institution for a wide range of reasons. You could be self-employed or simply don’t meet the banks typically conservative critera and thus you’re left high and dry. This is where private lending comes into play. Private lenders take into account a property’s overall value and marketability as opposed to simply the borrower’s credit history.There are private individuals who are willing to lend their money to you in hopes of earning a return on their investment.
What situations work with a private lender?
- Purchase of a property that a conventional lender or bank will not finance
- You need immediate financing and cannot wait for a long approval process
- You simpy need a short term loan
- Your credit history might not be ideal and thus you are always being turned down by conventional lenders
- Your income is possibly nonconfirmable (i.e. self-employed individuals)
Who are the Lenders?
What are the interest rates like?
Private mortgage lenders base their rates on the area, type of property, degree of risk perceived and estimated costs of administration. Each private mortgage interest is quoted on individual circumstances. Typically however the interest rates are a bit higher than what you would see advertised from most lenders. You can likely expect mortgage interest rates of 10% and higher.
How long does it take to be approved?
Approval typically takes place within 1 week of application and can sometimes be done even quicker. The actual processing of the loan and the final release of the funds can take approx. 2-3 weeks.
What criteria do private lenders use?
- Property value and type
- Your income
- Down payment amount (if you are purchasing)
- Equity (if refinancing)