What is a private mortgage?
A private mortgage allows borrowers to temporarily loan considerable funds from other individuals and businesses, rather than reaching out to a financial institution like a trust or a bank. Though these lenders often charge higher interest rates than banks do, there exist ample benefits to taking a private mortgage. These include faster financing due to the limited red tape and bureaucracy associated with dealing with private lenders, as well as a higher tolerance, providing an opportunity for rejects to rebuild their credit rating.
Whether you’re a struggling university student seeking to pay off your tuition, a shopaholic with sky-high accumulated interest debt, or already a homeowner, but are failing to make ends meet following a layoff or due to other circumstances, a private mortgage might be the solution for you. We all need a helping hand to get by from time to time, and the reality is that a little liquidity goes a long way in doing that. With Ontario banks and trusts following stringent lending rules and regulations, a continually increasing rate of Canadians are opting for private lending. But what is private lending, and is it the right step for you? Read on to find out.
Getting approved for a private mortgage
Unlike banks, private lenders refer to the Loan to Value (LTV) ratio of a property prior to deciding to make an investment. Determining a property’s LTV is a quick and simple calculation: divide its current mortgage value by its market value, and check to verify that the ratio falls below 80%. Properties with a greater LTV are considered too high-risk, and will normally not get approved. Once a property is approved, lenders will proceed to select an appropriate interest rate. Receiving a lower interest rate is dependent on the homeowner’s ability to yield a favourably low LTV, indicating low risk, as well as proving sufficient income to cover financial obligations.
If you’ve been declined by the banks, are looking to calculate and apply for your private mortgage, or would just like to chat about your options, we’re here to address your concerns. Don’t hesitate – contact Mortgage Solution Group at 1-888-233-6164 for professional advice from our brokers.