Getting a loan or a mortgage from a bank these days is made even more challenging because of the new lending laws. The fact is, not every Canadian can qualify for a home loan because of factors such as individual credit score, local regulations, and the increase in the number of applications.
People who are self-employed or those living in certain areas now face more hindrances in trying to buy a home, more so if they’ve had past troubles with defaulting on payments leaving them with bad credit scores. Because of this, more and more people in Canada are going to private lenders to fulfill their home financing needs.
Why Borrow From Private Lenders?
Private lenders do not use the same process lending process as banks and big financial institutions do. The way they operate is entirely different because their funding comes from private individuals or a small group of investors who have their own lending criteria. This fact enables private lenders to be more flexible in their lending process, therefore they do not have the same overly strict guidelines used by banking institutions. This is why for those who may not be traditionally employed or are in an unconventional situation, a home loan from a private lender might be the best choice.
Who Are Candidates for a Private Mortgage?
A home loan from a private lender is best for those who:
- Are freelancers or self-employed
- Have bad credit
- Are interested to invest in real estate
- Want to purchase a unique property
- Are planning to renovate their home
- Interested to access their equity but can’t refinance
- Have to consolidate credit card and other high-interest debt
- Need a short term loan
How to Get A Private Mortgage?
The first step in getting a private mortgage is to look up mortgage brokers because they have the resources you need when it comes to accessing alternative lending services. Having a broker will save you a lot of time and effort because mortgage brokers do a lot of the initial work for you. They assess your needs and determine which loan product is best based on your situation and ability to pay. This is so that they can seek out the best mortgage solution that will work for you, including the specifics such as your exit strategy as well as for how long your loan will be in place.
Note that private lenders usually lend locally; hence, it will save you a lot of time to talk to private lenders who lend in the specific area where your property is located. Lending locally is part of why the interest is kept to a minimum and will also be a factor that can increase the interest rate if the property is not in the lender’s preferred locations. A mortgage broker will be able to locate private lenders in your area but this service will come with a well-worth-it fee for connecting you with alternative lending solutions.