Are There Risks Borrowing from Private Mortgage Lenders?

Reports show that there is an increasing number of homeowners who are borrowing from private lenders in the Greater Toronto Area but are they doing the right thing? Is it safe to borrow from private mortgage lenders?

Why People Are Turning to Private Mortgage Lenders

With banks and large financial institutions having more restrictions these days, it can be very difficult for most homeowners to secure a mortgage loan; thus, the increasing popularity of borrowing from private mortgage lenders. Although private mortgage lenders charge a higher interest rate than a bank (because they take more risks, after all) it can’t be denied that borrowing from them is particularly alluring for those with bad credit or don’t have the luxury of time waiting for bank approval. The question is, are the people borrowing from private lenders making themselves vulnerable to more risks? If so, what are those risks?

New Canadian mortgage rules impose lower limits for what borrowers can borrow based on their income. The new rules do not apply to homeowners who are renewing their mortgage if they remain with their current lender. This suggests that a significant number of those who are choosing to refinance from private lenders are doing so because they need the extra money.

Who Are Borrowing from Private Mortgage Lenders?

Reports indicate that those turning to private lenders are not only those who have bad credit but also include those with great jobs and fantastic credit but happen to be living beyond their means. Because of this, they tend to accumulate debt and need some cash to pay it off. Some are young families who need funds for a renovation because they can’t afford to move to a bigger house. Another group who are borrowing more are investors. This is not just in the GTA, a similar trend is happening in Vancouver.

Why Go to a Private Lender?

Private lenders are not as strict as banks and large financial institutions because they are often private individuals lending their own money or a small group of investors who make their own restrictions regarding who to lend money to and more. Because they are not obliged to follow the same rules as banks, they are able to take riskier loans and thus help out people who can’t qualify for loans with banks under the stricter new mortgage regulations.

Mortgage brokers describe private lenders as a short-term lifeline for borrowers who cannot access other sources of funding so that they can improve their finances through better money management. If used correctly, funds from a private mortgage loan can save lives and also save homes in the process. It can buy enough time to allow someone to repair his or her credit score, pay off some debts, or renovate a home so that it can be sold for higher market value and avoid financial ruin.

Are There Risks Borrowing from a Private Mortgage Lender?

Of course, there are, but they are the same set of risks any borrower may face when borrowing from banks and large financial institutions. Interest rates are higher with private mortgage lenders but that is understandable considering they offer loans to those with riskier situations. They vary in how fast they may foreclose on a home so be sure to read the fine print before agreeing to their terms. Better yet, be sure to find ethical private mortgage lenders in your area with the help of mortgage professionals.

At Homebase Mortgages, we connect you with private mortgage lenders with terms that will fit best with your current financial situation. We aim to make getting a mortgage loan and paying it easier for you. Contact us and let us tell you how.


Get a Loan Even With A Bad Credit

Buying your dream home or taking a loan is near impossible if you have bad credit. This is because one’s credit score is usually used by lending institutions as a way to determine how risky it would be to lend money to a specific individual.

Unfortunately, the credit score does not really represent one’s intent to pay because having a bad credit can mean that a person has simply had a string of unfortunate incidents that caused delay payments. Factors such as a single day delay in payment, unemployment, or maxing out a credit card due to necessity can damage one’s credit score badly. Below are some information on how you can get a loan or buy a home despite having bad credit.

Choose a Shorter Tenure

A shorter tenure means quick contract termination. This is attractive for lenders because this shows confidence in being able to pay your loan. Aside from this, a shorter tenure means less money paid towards interest and the sooner you can get everything paid in full.

Approach the Right Lender

People who get turned down for a loan because they have bad credit are usually turned down by banks and other large financial institutions. This is because banks and large financial institutions will always choose to lend to those with lesser possibility of defaulting. This is why approaching the right lender is important. The right lender will consider cases that typical lenders will not. Approaching the right lender can done with the help of mortgage professionals who can connect a borrower to a private lender with terms that are aggreeable for both parties.

Producing A Higher Down-payment

Coming up with a higher down-payment when trying to borrow for a house can make lending to you more attractive to a lender. This also works in your favour later on because a higher down-payment means getting a better interest rate as well.

Have A Trusted Co-Signer

Applying for a loan or a mortgage with a trusted and secure co-signer can get your application approved regardless of bad credit. A bonus is that you might be able to negotiate a lower interest rate if with a trusted co-signer.

Contact a Private Lender

Because private lenders are usually individuals or a business with a small group of investors, you’ll be borrowing from people who are likely to take a hands-on approach to approving your loan. They understand that a bad credit score is caused by many factors and is not a real indicator of future ability and intent to pay. Thus, private lenders look into other factors such as current employment status, income, and the viability of the loan, giving you a higher chance for approval.

Mortgage professionals tend to use the information above to get your loan approved with the right lenders. They will help you get a loan as well as manage your bad credit to help fix your finances. If you need a professional mortgage broker, contact Homebase Mortgages and we’ll assess your current financial situation to help you find a loan product that works for you.

A Bank Declining Means It is Time to Try a Private Mortgage

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.

A bank declining your loan shouldn’t stop you from seeking other financial solutions. If you need help getting a private mortgage or other loan products from a private lender, contact us today!

Use a Private Mortgage the Smart Way

A lot of people are afraid of applying for a private mortgage despite hearing a lot of good things about it and how it can benefit them because they worry that they might mess up and cause more financial issues on their side. That shouldn’t be the case, more so now that there is an increasing interest in getting a private mortgage because not everyone have impeccable credit ratings and can borrow brow traditional lenders.

What is a Private Mortgage and Why Get it

A private mortgage is a type of loan that you can get from a business, institution, or an individual that is not a traditional lender of mortgage. When done correctly, getting a private mortgage will create a win-win scenario for everyone where each party involved gains financially without going through too much risk.

But here’s the thing, we’ll be talking about getting a private mortgage in here from a party that is known to you or known to us. Trying to get one from cold contact is referred to as a hard money loan so we will not be tackling that.

So, why get a private mortgage from private lenders and not try to get a loan from other funding solutions?

Although there are a lot of possible lenders like local credit unions, big banks, online lenders, and their likes, getting a loan from them isn’t as easy as filling up an application form and getting approved.

The go-to lenders often have a lot of qualifying criteria in place such as you being able to provide certain documentation, being a resident for a certain number of years, having a good credit score, being employed for a specified number of years and so on. What if you’re a self-employed individual? Where are you going to get some of these forms? Or how about if you’re a young adult just starting out in life and have no credit score yet to speak of.

When you go the private route, you can save on paying interest and will have better chances of being lent the money that you need.

Issues When Getting a Private Mortgage

You have to keep in mind that even with the best intentions, deals can go awry and some issues will come up. This means that if you know your lender in real life, relationship strain might become an issue when you can’t pay or when they decide to give you higher interest than what you are expecting. This is why having a third party draw up terms can be very beneficial.

Another possibility is you may not get the loan you want because the lender will have to also cover their bases and consider property value fluctuations. This means that if your house is worth $500,000, the amount you’ll be able to borrow would be a lot less than that to account for other scenarios down the road.

Also note that maintaining the house is your responsibility so is checking that the title is good and that all taxes are paid on time. Once you note this and all of the above, you are ready to apply for a private mortgage and draw up private mortgage agreements with the help of a trusted private mortgage broker.

Using a private mortgage has many advantages. If you feel that you’re ready to apply for a private mortgage, don’t hesitate to contact us so we can assist you with getting one and making sure that the terms are what you can handle.

Try An Alternative Funding Source With Private Lending

If you own a business or tried to start one, you know that getting a loan from banks is about as easy as getting an uber to fly you to the moon, more so when your credit history isn’t as spotless as you may want it to be. It seems like no matter how well prepared you are and how nicely drawn your business plans are, financing via a bank loan just isn’t for everyone.

Private Lending as Alternative Funding

Financing via a loan from a private lender is often the best funding option for entrepreneurs who’ve been turned down by banks or is likely to be turned down by traditional lenders. This isn’t because private lenders will just hand over money to anyone who asks, in fact they are often as diligent as banks when checking for your information and credit history; it is just that they aren’t as institutionalised as banks and can look into each application with more consideration.

This is good news for those who want to keep their whole enterprise their own and not take investors in who want control in operations and executive level. A private lender won’t want that. They are usually just concerned with you being able to pay off your loan. That’s why they take risks on business ideas that have a good chance of truly taking off, to begin with.

Should You Get A Loan From A Private Lender?

A private lender is your best bet if you’ve got a realistic business plan that shows good promise backed by statistics and solid feasibility, more so when you can find a private lender that specialises in your business’ niche. Not only will they look into the viability of your proposed venture but can provide you great insights along with giving you a sound repayment plan that you really can pay for. Kind of like getting a mentor or a business fairy godmother.

Get a Private Lender

How do you find the private lender for your niche? You can ask around or get the help of professional brokers who can match you with a private lender that’s likely to give you a loan. This is easier than going through lender after lender trying to get one to take interest in what you’re trying to do.

Know too that there are private lenders that do not really have a niche or a specialty as to whom they give loans to, but have a solid track record of spotting businesses that are bound to succeed. These lenders usually use brokers to help connect them to entrepreneurs in need of capital. The brokers screen the projects and recommend the right private lender to borrow capital from. As such, they make everyone’s life a lot easier.

Thinking about getting in touch with a private lender to get a private mortgage but don’t know how and would want to get assistance from a professional mortgage broker? We’re here to help! Talk to us today! We’ll get in touch as soon as we can!

Must Know Facts About a Private Mortgage

A lot of people are getting interested in applying for a private mortgage but are not sure if getting one will truly be beneficial for them. After all, getting a private mortgage is a big decision and not just something to take on a whim. You’ll want to weigh the disadvantages against the advantages to ensure that you get the most benefits from applying for a private mortgage. Below are more helpful information.

Why Get a Private Mortgage?

Applying for a private mortgage is often one of the best options for people who may not qualify for a loan with a traditional lender. Banks and credit unions often require a lot of paperwork that not everybody may be able to provide even if they are more than capable of repaying the loan. Private lenders are friendlier for freelancers, self-employed individuals, and small business owners.

Your Property Value is a Factor

Lenders will have to assess how much they stand to lose in the event of property value fluctuations because even small fluctuations can mean tens or even hundreds of thousands of dollars. It is normal for them to ask you for a lot of details regarding this factor.

Maintenance is Key

You will have to make sure that you can take care of maintenance needs because no lender will lend you money (an investment on your property from their part) if the said investment is not sound, to begin with. You’ll have to be able to pay for maintenance and not let things get out of hand.

Title Issues Are a No Go

A title search is pretty much a requirement before you can apply for a private mortgage because this provides extra protection for the lender. After all, they can’t give you a mortgage on a home that you can’t prove you own.

No Outstanding Tax Complications

Given that tax laws are tricky and the government will really go after someone who hasn’t paid tax obligations, getting rid of tax issues is a must before even considering getting a private mortgage to avoid issues down the line.

Be Ready for Private Mortgage Agreements

Because a private mortgage is a type of loan, everything will have to be put into writing for details to be well documented. This ensures that no issues will come up later should one party forgets the terms they agreed to. Make sure that your documentation will include details on:

  • Payment terms
  • Acceptable forms and channels of payments
  • Possible penalties for failure to make payment
  • Prepayment stipulations if allowed
  • Collateral for the loan (in full detail)
  • Foreclosure terms

Doing a Private Mortgage Correctly

The best way to make sure that you do a private mortgage correctly and avoid possible expensive mishaps is to engage the help of mortgage professionals who can help you find private mortgage lenders as well as assist you in negotiating terms that are within your capacity to meet. The last thing you want is to make uninformed decisions that can cost you your home.

Do you want to speak with a mortgage professional to really determine if a private mortgage is the best financing option for you? Talk to us today!

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!

Not Qualified for a Bank Mortgage? Get a Private Mortgage Instead!

Qualifying for a bank mortgage is like trying to trying to place the moon in a tiny cup for people who do not have near perfect financial records. And it is not just them. This also affects individuals who’ve only recently moved to Canada as well as people who are self employed. What’s there to do?

If you’re one of the above or have credit problems, there are still mortgage solutions for you. Sure, banks may not be best option more so with the new mortgage rules for this year; but a quick talk with mortgage specialists will let you know that you may just be an application away from alternative mortgages and private mortgages.

Financing with a Private Mortgage

Using a private mortgage for financing is especially helpful for the following people:

  • Private investors
  • Self-employed people
  • Non-Canadian residents
  • Foreign investors
  • Those with a bad credit
  • Those planning to but small condos or micro condos that are under 600 square feet
  • People who have a commercial or construction loan
  • People whose property is under foreclosure
  • Those who still owe taxes to the Canada Revenue Agency
  • Business people who want to start a business with the use of equity takeouts
  • Those who are not fully paid for their property tax

It should be noted that banks are not the place to apply for a private mortgage for most people. Fortunately, professional mortgage brokers can help with connecting borrowers with the right individuals and businesses that can lend private mortgage or a helping hand (financially speaking).

Applying for a Private Mortgage

Getting an approved application for a private mortgage is subject to a lot of factors. You should know that if you’re planning to purchase property, then you will have to get financing for the 15% to 20% down payment that you need to initiate your purchase. You should also know that your mortgage rates will vary based on whether you’re buying your first, second, or third real estate property. As for payments, you can opt for interest only payments or make it an open loan so you’ll have the freedom to just pay all your mortgage early with no penalty.

Find a Good Mortgage Broker

Know that your private mortgage will have certain fees. This is how the broker gets paid and how some of the paperwork is paid for. The fee can be as little as $500 or as high as 5% of the amount you borrowed. This fee will vary from one mortgage broker to another.

A good mortgage broker should help you plan an exit strategy in the event that you want to move to a lower-rate mortgage. That’s what we do at Homebase Mortgages because we believe in helping you each step of the way. We want to protect your best interests because that’s how we ensure that you’ll be able to do financially better in the long run.

Ready to apply for a private mortgage? Contact us and we’ll assist you with our mortgage services each step of the way!

Why Use Private Mortgage Loans

Private mortgage loans are helping people have access to funds they won’t otherwise have by using their property as a collateral. Of course, one can try to get a traditional loan from the bank or some other financial institution but that may not always be possible due to a variety of reasons. Here are some of them:

Qualifying Issues

Institutions often require that the borrower have a good credit score in addition to having a good property plus a lot of other requirements. In some cases, loans are not approved because the borrower’s property is not producing a good enough income to qualify as collateral or that it requires too many repairs or significant rehabilitation to be usable.

When institutions decline a borrower, it is often then that they seek other sources of funds and come across a private mortgage lender. Private mortgage lenders do not care about somebody’s credit score or some other requirements. They only often require that the amount to be borrowed is fair considering the property’s appraised value and the borrower’s projected income. Simply be able to pay the loan or have property that can offset the cost of the loan in the event of a default is all they require.

The Need for Privacy

Applying for a loan in an institution means filling up paperwork and a lengthy verification process leading to several people becoming aware of the loan application. If a person is going through a divorce or has a new lawyer that he or she may not be very comfortable with yet, this can be a very stressful time. Private mortgage lenders do not put borrowers in such a predicament and do not care if someone is delayed in his tax return or if his property information details are not up to date.

Speed Issues

Mortgage money from financial institutions or banks can take 60 to 90 days to get to the borrower. This is because traditional lenders often require an extensive assessment of the borrower’s current financial status, credit history, tax returns, and financial statements aside from getting the appraised value of the property.

On the other hand, private mortgage lenders usually just take 7 to 10 days to complete a transaction. This is because they usually only require assessment of the property as the main criteria before approving a loan therefore resulting in a significantly quicker approval process. They can decide in a matter of a day or two with no need for a loan approval committee like what is seen in traditional financial institutions.

Needing More Money

Private mortgage lenders may allow the borrower to borrow more because they only use the property’s appraised value with no need to subtract their own capital or adjust based on the borrowers’s income. This means that the borrower may be able to push for a bit more as long as the private mortgage lender is amenable. Win-win!

Ready to apply for a private mortgage? Let our professional mortgage brokers lend a helping hand. Contact us for private mortgage assistance.

The Benefits of Using a Private Mortgage Lender

It seems that not many are aware of the benefits of private mortgage and how they can be used by almost anyone. Private mortgages are truly an under used option by mortgage applicants perhaps because some may not know that it can be the best option for those who have a high possibility of being turned down by traditional lenders or those who just want a bit more flexibility than what a bank can offer.

Alternative Option for Those Turned Down By Strict Lending Rules

Because more regulations are presently being imposed on potential homeowners, it is understandable that not all who apply will qualify. People who have no guarantor or those who have no means to pay a higher interest rate are likely to be turned down.

As it is, an example of how things can change would be the rules imposed in October 2016 courtesy of the Federal Government. It made private lenders change how they give private mortgages to people.

How to Apply for a Private Mortgage

Applying for a private mortgage can be a tricky process. You can try to meet and approach private lenders by searching on the web or perhaps by word of mouth as private lending is a legitimate business. Hopefully you won’t have to resort to hiring a private investigator in Mississauga order to find the right one! The thing is that each private lender has their own regulations and stipulations so shopping around may not be as easy as most may think.

Advantages of a Private Mortgage

Because not everyone has a strong credit rating, a stable job, big home equity, and more, applying for a bank loan is not for everybody. Big banks usually turn down borrowers who do not check enough of their boxes. This is why private mortgage financing is such a great alternative for a lot. People who can reap the advantages of a private mortgage include:

  • Foreign investors
  • Anyone looking to flip a property
  • Applicants who owe taxes
  • Self-employed people
  • Applicants who are rebuilding their credit score
  • Those who are looking for equity for other ventures such as starting a business

Disadvantages of a Private Mortgage

Your property matters a great deal when applying for a private mortgage. This is why people with properties in undesirable locations may be rejected by lenders. Another disadvantage of a private mortgage is that the fees because this can vary so much between lenders. Note that private lenders pay 1% to 5% of the borrowed amount to the broker that made it possible, hence, the discrepancy. Another possible disadvantage is you choosing one that would be nearly impossible to pay within your means and present financial status. Extra care is truly needed.

Still unsure if approaching a private lender or applying for a private mortgage is for you? Talk to us at Homebase Mortgages so we can walk you through what you need to know. We can also help you get approved as well as review the terms for you so you can be sure that you end up with a private mortgage that will serve your interests. Contact us at your earliest convenience!