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More Canadians Are Turning To Private Mortgage Lenders and Here\’s Why

An increase in Canada’s mortgage rates will eventually happen and when it does, the national real estate market will get one of the biggest shocks it will ever have in the past 3 decades or so. There is fear that the real estate bubble will burst and policymakers are busy trying to prevent that from happening by deflating the bubble while they still can.

Popularity Rise

In view of the above, it is little wonder then that private lender mortgages have become more popular in the last decade. If recent marketplace changes are to be considered, then the private mortgage lending industry is bound to get more action soon. This is because the jump in home values have resulted to tighter regulations on banks which in turn have imposed stricter qualifications as to whom can borrow from them.

Private mortgage lenders generally cater to people who’ve been turned away by banks. Other typical customers are people who have bad credit, are new immigrants, or are self employed. A private mortgage lender’s screening is typically more reasonable than a bank’s. They can afford to be like this because they aren’t as deep into paperwork as banks.

With the above said, lending rules in Canada are becoming more and more strict in recent years due to fear of the real estate bubble bursting. This fear is what is causing the government to create dramatic changes in an effort to cool down the market but making borrowing a lot more difficult for people who need cash.

Answering Demand

People who need emergency cash are turning to private mortgage lenders if they need a large sum of money. True, private lenders are nowhere near inexpensive but they are still the best option for many people who have no chances of being able to borrow from banks or certain institutions.

How and why private mortgage lenders can lend money to people with bad credit or in bad financial status is because they operate in an unregulated environment. Their operations are still small, estimated at just around 15% of new mortgages in Canada but even that small amount was a result of a rapid climb in the need for their services since the recession in 2008 to 2009. Their market share of just 0.8% of the mortgage market continually increased by 25% shared CIBC World Markets deputy chief economist Benjamin Tal.

Private Lending Now

The private lending market is currently saturated with big players with huge companies cashing in on the demand and competitors outplaying each other’s ads to remain on top.

The Canadian government is doing what it can to significantly cool the market, prevent further rise, and avoid crashing the market while doing both. An example of the government doing this can be seen in the implementation of the foreign buyer tax in British Columbia which had an immediate effect of stopping further price increase in the area and surrounding markets.

Is the above bad? That still remains to be seen. But if you’re one of those who can no longer apply to banks for a mortgage, you may want to look up how to get a mortgage from a private lender.

Need help connecting with trusted private mortgage lenders? Contact us and we’ll help you apply for and secure a loan today!

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