Private mortgages are an excellent alternative for people not qualifying for traditional loans.
This is a good solution for several reasons if you're suffering from a poor credit history or financial difficulties. These loans are more streamlined and flexible than traditional products and compare well with what credit unions and banks offer.
Flexibility and Speed of Private Lending in Ontario's Diverse Market.
Private mortgage lending in Ontario is a viable alternative for people who do not qualify for more traditional products from credit unions and banks. These alternative loans are processed faster than their conventional counterparts.
Going through the traditional lending process can take a few weeks. Banks and credit unions focus on strict documentation of your employment and income. These conventional institutions also look at your down payment source and credit score.
Private mortgages require some of the same documents, but the focus is more streamlined. It includes the Loan-to-Value (LTV) ratio, which is based on the equity in a property. This formula is calculated by dividing the total debt security against any property by the current appraised value. Private lenders usually put an upper limit on the loans at an LTV ratio of 75%.
The result is a more streamlined process for private lending. The speed and flexibility come from focusing on debt load and property value rather than extensive credit checks and documentation.
There are some other significant differences between the two types of lending.
Comparing Private and Traditional Lending Options in Ontario.
Traditional banks can take up to several weeks to approve a mortgage or loan application. Private lenders can often finalize those arrangements in a matter of days.
These private mortgages can be used for distressed homeowners to stop a foreclosure or power of sale. By using a Loan-to-Value ratio and the equity that's built up in a property, private lenders can also approve bad credit mortgages.
Banks and other traditional institutions have stricter lending criteria. Private lenders are regulated under what's called the Ontario Mortgages Act. On the other hand, banks and credit unions are regulated by federal legislation.
Private lenders also treat properties in urban areas a little differently than they do in rural locations. Here's what you'll need to know about that.
The Role of Private Lending in Ontario’s Rural vs Urban Areas
As the workforce changes, so do the locations people work from. For example, the percentage of Canadians who had a home office was 32% as of March 11, 2024. That means there's been a movement of people to suburban and other areas that can affect private lending criteria.
Remember that private lenders calculate the LTV ratio by dividing the requested mortgage plus existing mortgages by the property's appraised value. Many private lenders work under the assumption that in-demand houses are in urban areas and more likely to retain their value than ones in rural locations, which can make the LTV stricter for these rural lands.
Private lending is an excellent choice for agricultural properties and farms. These alternative lenders can sometimes offer a higher LTV ratio because they have income-generating possibilities. Private lenders can include equipment and livestock plus existing crops.
Success Stories: Innovative Private Mortgage Solutions in Ontario.
Carrie Condo (not her real name) is a 65-year-old retiree with a small income stream that would not allow her to make all her payments. She was about to be evicted for nonpayment of condo fees.
She lives in a midsize condo in Brampton worth about $500,000. We were able to arrange a $100,000 mortgage through our LTV requirements.
As a result, Carrie got a prepaid mortgage for one year, so the money was set aside to make automatic payments. We also recommended a solution: sell the property since renting would be cheaper than a private mortgage in the long run.
Carrie was also allowed to renew after a one-year term for another prepaid mortgage payment product.
Are You Looking for a Private Mortgage?
Mortgage Broker Store focuses on private mortgage-related products, including private mortgages. Mortgage applications that don’t meet traditional lending requirements are a specialty. Our team of private lenders, brokers, and licensed mortgage agents is ready to help. Let us help you get a mortgage loan that fits your requirements today.
Email [email protected] or call 416-499-2122.