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Last year, Canada imposed new and tougher mortgage regulations and requirements. First time homebuyers now have a hard time in having their mortgage application approved. More potential homebuyers are literally getting stressed out with the minimum requirement of the stress test. Refinancing and getting a new mortgage from another lending institution is also difficult. Now, homebuyers have to provide evidences that they are not just able to pay a sizeable amount for a down payment, but also capable to pay increasing interest rates and monthly payments consistently on time.
With the stricter mortgage regulations, getting approved for a mortgage in banks and traditional lending institutions is not an easy task. Because of this, potential homebuyers turn to private mortgage companies in Canada.
A private mortgage is an alternative solution for those could not pass the stringent mortgage requirements. This type of mortgage is short-term ad only lasts for one year but can be renewed. Regulations and requirements are more flexible in order to adjust to what you need. When potential homebuyers go to private mortgage lenders, they have more chance of approval and success in their mortgage application.
What should I know about private mortgages in Ontario?
One thing that attracts borrowers to lean towards private loans is its relaxed rules and requirements. Private mortgage lenders will not scrutinize whether or not you have high income. They will not reject your application immediately even if you have a bad credit history. As long as you have enough proof that you will be able to repay your loan, then your application will be successful.
When you apply for a private mortgage, you will be surprised how private mortgage advisors or consultants are very attentive to you and your needs. They know that each of their clients have their unique experiences and needs. With this, they have to know your financial situation, your background, or your property very well in order to give you a more customized approach in dealing with your application.
Another thing you have to know about private financing is how much money you can borrow. Of course, that would probably be the first question that would come to your mind. Private mortgage lenders in Ontario will look at your property’s loan-to-value (LTV) ratio. It is the percentage of the value of your loan against the value of your property. Getting the LTV is done to measure your mortgage risk. Although each private lender has their own process, most of them usually lend as high as 80% to their borrowers especially if their property is considered as a prime property.
Application and approval for a private mortgage may be fairly easy, but you should also note the risks that you have to take when you get this type of mortgage. Private lenders charge a higher interest rate compared to the traditional lending institutions. On top of your interest, they also charge loan processing fees, lender fees, and assessment fees among others. Since private loans are short-term loans, you also have to repay them within a given period of time.
When should I get a private loan?
Getting a private mortgage is best if you want to buy or renovate a property and sell it in a short period of time. In this way, you can be able to repay your loan immediately.
You can also get a private loan if you have been turned down by banks and other lending institutions far too many times. Since private mortgage lenders in Ontario do not take much consideration in your credit history or income, you can easily get your private mortgage application approved.
As we always say here in Private Mortgage Canada, the best time to get a private mortgage or any type of mortgage is when you’ve done enough research. If you think you’re not yet ready to apply for a private financing, you can always call us. Talk to our team of financial experts who are adept at answering all types of mortgage-related concerns.