If you’re like the millions of Canadians who have not so great credit or are self-employed, you’re going to have trouble getting a mortgage. It’s not your fault, but traditional lenders have to weigh their risks… but this doesn’t mean you can’t get a mortgage! Private mortgages are one of the best avenues for people to get the money they need, but are they right for you? Here we’re going to go over everything you need to know about them, so keep reading!
What is a Private Mortgage?
Mortgages are simply financing for homes. The “Mort” part of the word comes from French; this just means that it needs to be paid off in full by the end of the contract. You’ll need to pay off your mortgage by the end, but there is always the option to refinance your mortgage.
Private mortgages are lent to all kinds of borrowers by private companies, investors and individuals. This means that they’re going to look at what you can offer as collateral instead of what your credit is. Collateral is something that you can put up for the loan like a car or home; if you have collateral you’ll most likely be able to get a private mortgage; they’re usually given to borrowers who are looking for second mortgages.
Do You Need Equity to Get a Private Mortgage?
It really depends on what type of private mortgage you get. You’ll want to talk with one of our mortgage brokers to see if what you need to qualify. Equity is the value of your home minus whatever mortgages you currently owe. Here’s a quick experiment:
You have $20,000 for your down payment on a $100,000 home. If you want to borrow with a private mortgage you would need to borrow $80,000. You’ll technically have 20% equity in your home, and 80% debt. You’ll be able to get that 80% loan by putting up the $20,000 that you put down. This is confusing, but that’s how it works.
Interest Matters with Private Mortgages
You’ll want to go with a Toronto mortgage broker to make sure that you’re getting a good deal on your private mortgage! While they may offer you decent terms and the money you need, if you’re paying 10% interest you’ll owe the same amount you borrowed in interest by the end of a ten year term. Interest matters when you take out a mortgage; here are some examples:
You borrow $30,000 at 10% interest. If you only make the minimum payment you could end up with $3,000 accruing each year. If you have a 30 year mortgage you could end up paying over $90,000 for borrowing $30,000. Don’t sign the paperwork before you talk to us. We’ll help you find a good loan at a good rate.
We’ll help you find different offers from different lenders so that you don’t get stuck with a bad deal. When you look at the big picture you’ll discover just how much you can save!