Private Mortgage
When a traditional bank or lending institution will not approve a borrower for a mortgage or refinance loan, a borrower can seek out a private mortgage to gain access to funding. Generally, these are short-term, interest-only loans ranging from 6 months to 3 years. Toronto Private mortgage brokers will help you identify the right private lender based on your needs and specific financial situation.
In many instances, the banks turn away perfectly capable borrowers who cannot meet the strict guidelines used by banks and other traditional lending organizations. Instead of focusing solely on the borrower's credit score and income, private lenders place a greater emphasis on the value and condition of the property.
Many borrowers will attempt to obtain a mortgage or refinance their property by talking to their bank first. Unfortunately, this has become increasingly difficult in the modern age. It is very common for banks to reject loan applications due to poor credit, unpaid debts in arrears, low income, or other reasons. This is where we can help you, our professional brokers at Toronto Private Mortgage will get you a quick approval from one of our alternative lenders, also known as B lenders, or one of our partner private lenders.
Trust Companies and Credit Unions normally charge higher rates than Banks but lower rates than private lending companies such as MICs or individual private lenders who use their own personal money.
People usually turn to B-lenders when they get rejected by a bank as these alternative lenders are a good second option with the second-lowest rates. In the event that an applicant is denied by a B-lender, the only other option would be to go through a private lending company or an individual private lender who would fund and underwrite the application in one shot.
The good news is that at Toronto Private mortgage, we have many private lenders who we work with and who provide our clients with some of the lowest interest rates on the private mortgage market.
The lenders we work with are also our partners and we all have the same goals. Fund clients quickly or within an acceptable time frame, get them the lowest rates and most beneficial mortgage terms and provide them with an assurance that we will be there for them for as long as our services and advice are required.
Private mortgages typically have a one-year term. Some mortgage lenders use their own personal funds to finance these types of private mortgages. Therefore, if a shorter or longer term is preferable for you, then we can match you with the right lender so you can apply for a customized mortgage. A privately financed home loan term begins at 6 months and can extend as long as 3 years for a second mortgage, third mortgage, or first mortgage. This depends on your needs and the terms of the lender.
Someone who almost qualifies for a B lender, but needs some time to either build up their credit, save up a larger down payment, or grow their income and net worth may find a private mortgage to be an ideal short-term option. A private mortgage lender lends largely based on the property's value, the equity, and the location of the property.
If you're denied for any reason, don't hesitate to reach out - we'll work with you and come up with the right plan in 48 hours!
In many instances, the banks turn away perfectly capable borrowers who cannot meet the strict guidelines used by banks and other traditional lending organizations. Instead of focusing solely on the borrower's credit score and income, private lenders place a greater emphasis on the value and condition of the property.
Many borrowers will attempt to obtain a mortgage or refinance their property by talking to their bank first. Unfortunately, this has become increasingly difficult in the modern age. It is very common for banks to reject loan applications due to poor credit, unpaid debts in arrears, low income, or other reasons. This is where we can help you, our professional brokers at Toronto Private Mortgage will get you a quick approval from one of our alternative lenders, also known as B lenders, or one of our partner private lenders.
Trust Companies and Credit Unions normally charge higher rates than Banks but lower rates than private lending companies such as MICs or individual private lenders who use their own personal money.
People usually turn to B-lenders when they get rejected by a bank as these alternative lenders are a good second option with the second-lowest rates. In the event that an applicant is denied by a B-lender, the only other option would be to go through a private lending company or an individual private lender who would fund and underwrite the application in one shot.
The good news is that at Toronto Private mortgage, we have many private lenders who we work with and who provide our clients with some of the lowest interest rates on the private mortgage market.
The lenders we work with are also our partners and we all have the same goals. Fund clients quickly or within an acceptable time frame, get them the lowest rates and most beneficial mortgage terms and provide them with an assurance that we will be there for them for as long as our services and advice are required.
Private mortgages typically have a one-year term. Some mortgage lenders use their own personal funds to finance these types of private mortgages. Therefore, if a shorter or longer term is preferable for you, then we can match you with the right lender so you can apply for a customized mortgage. A privately financed home loan term begins at 6 months and can extend as long as 3 years for a second mortgage, third mortgage, or first mortgage. This depends on your needs and the terms of the lender.
Someone who almost qualifies for a B lender, but needs some time to either build up their credit, save up a larger down payment, or grow their income and net worth may find a private mortgage to be an ideal short-term option. A private mortgage lender lends largely based on the property's value, the equity, and the location of the property.
If you're denied for any reason, don't hesitate to reach out - we'll work with you and come up with the right plan in 48 hours!
The different types of Private Lenders
What is the difference between Private lenders and private lending companies?
There are 3 main different kinds of private lenders in Canada
1. The first one on the list is Mortgage investment corporations (MIC):
Mortgage Investment Corporations are formed when a group of investors pool their personal funds. Rather than investing them into one mortgage at a time, they invest them into several at once, if the borrowers qualify.
2. The second one on the list is Private mortgage companies also known as Syndicate investors:
Syndicated mortgages are created when a group of investors invest their personal funds into one mortgage as a group.
3. The third on the list is individual private lenders:
Lenders who invest their own money into private lending are known as individual lenders.
Good reasons to turn to a private lender:
People can choose to work with a private lending company or an individual private lender for many reasons. We have seen clients use private lenders for a variety of reasons, some of which include:
There are 3 main different kinds of private lenders in Canada
1. The first one on the list is Mortgage investment corporations (MIC):
Mortgage Investment Corporations are formed when a group of investors pool their personal funds. Rather than investing them into one mortgage at a time, they invest them into several at once, if the borrowers qualify.
2. The second one on the list is Private mortgage companies also known as Syndicate investors:
Syndicated mortgages are created when a group of investors invest their personal funds into one mortgage as a group.
3. The third on the list is individual private lenders:
Lenders who invest their own money into private lending are known as individual lenders.
Good reasons to turn to a private lender:
People can choose to work with a private lending company or an individual private lender for many reasons. We have seen clients use private lenders for a variety of reasons, some of which include:
- Clients looking for a short-term loan
- Clients purchasing land or property that institutional lenders do not lent on
- Clients closing date was close and they needed funds right away
- Clients were denied or rejected by a Canadian national bank
- Self-employed clients who had stated income
How many payment options does a private mortgage have?
Private mortgages do not require monthly principal and interest payments but instead only require the borrower to pay the interest. Monthly payments are therefore more affordable.
Depending on the loan origination process, you may even be able to pay no monthly interest by prepaying all interest when the loan is funded. This will enable you to have the amount deducted from the loan amount.
A private mortgage with accrued interest also allows all of the monthly interest payments to be deferred until the end of the loan term.
Alternatively, you may consider an amortized blended payment plan, which allows both interest and principal to be rolled up into monthly payments, much like a traditional mortgage. This will build up more equity in your home. Using a blended amortized private mortgage, the monthly payment can be calculated over an amortization term of up to 40 years, ensuring lower monthly payments.
Depending on the loan origination process, you may even be able to pay no monthly interest by prepaying all interest when the loan is funded. This will enable you to have the amount deducted from the loan amount.
A private mortgage with accrued interest also allows all of the monthly interest payments to be deferred until the end of the loan term.
Alternatively, you may consider an amortized blended payment plan, which allows both interest and principal to be rolled up into monthly payments, much like a traditional mortgage. This will build up more equity in your home. Using a blended amortized private mortgage, the monthly payment can be calculated over an amortization term of up to 40 years, ensuring lower monthly payments.
What is the length or amortization of a private mortgage?
Private mortgages are usually short-term loans lasting from 1 month to 3 years. In either case, the full amount of the mortgage is due at the end of the term, or you may choose to renew the mortgage with the current lender. Private mortgages are usually repaid by refinancing the entire debt with another lender.
At Toronto Private Mortgage, we are dedicated to helping you create a plan that will help you get out of your private mortgage as quickly as possible. This will enable you to get into a more traditional mortgage at a much lower interest rate. When your private mortgage term is nearly over, our team will find and match you with a traditional lender that is right for your needs and circumstance.
At Toronto Private Mortgage, we are dedicated to helping you create a plan that will help you get out of your private mortgage as quickly as possible. This will enable you to get into a more traditional mortgage at a much lower interest rate. When your private mortgage term is nearly over, our team will find and match you with a traditional lender that is right for your needs and circumstance.
Private mortgage lenders rates in Ontario
When it comes to private mortgage lenders rates in Ontario, there are a number of factors that are taken into consideration when private mortgage lenders are underwriting your mortgage application.
The three main things Private mortgage lenders look at are the value of the property, the location of the property and the condition of the property. The interest rates for a first private mortgage start at 3.85% and can be as high as 12.99%. The interest rate for a private second mortgage starts at 6.99% and can be as high as 17.99%.
The advantage of individual private mortgage lenders is that they are typically able to offer better interest rates than a mortgage investment company (MIC). Larger mortgage investment companies such as MICs have groups of investors and therefore need to see a higher return on their investment. These MICs also need to cover company operation costs and employee salaries leading to higher interest rates.
Borrowers should only approach alternative lenders such as a Credit Union, Trust Company, or private mortgage lenders if or when they get turned down by banks.
Some of the larger credit unions are Vancity, Meridian Credit Union, Desjardins Ontario Credit Union and First West Credit Union.
Some of the registered Trust Companies in Ontario are B2B Trustco, BMO Trust company, Cidel Trust company and Canadian western Trust.
Check out the complete list of trust companies that are registered by FSCO Financial Services Commission of Ontario
- The value of the property you are applying the private mortgage for
- The location of the property you are applying the private mortgage for
- The condition of the property you are applying the private mortgage for
The three main things Private mortgage lenders look at are the value of the property, the location of the property and the condition of the property. The interest rates for a first private mortgage start at 3.85% and can be as high as 12.99%. The interest rate for a private second mortgage starts at 6.99% and can be as high as 17.99%.
The advantage of individual private mortgage lenders is that they are typically able to offer better interest rates than a mortgage investment company (MIC). Larger mortgage investment companies such as MICs have groups of investors and therefore need to see a higher return on their investment. These MICs also need to cover company operation costs and employee salaries leading to higher interest rates.
Borrowers should only approach alternative lenders such as a Credit Union, Trust Company, or private mortgage lenders if or when they get turned down by banks.
Some of the larger credit unions are Vancity, Meridian Credit Union, Desjardins Ontario Credit Union and First West Credit Union.
Some of the registered Trust Companies in Ontario are B2B Trustco, BMO Trust company, Cidel Trust company and Canadian western Trust.
Check out the complete list of trust companies that are registered by FSCO Financial Services Commission of Ontario
What are the fees associated with a private mortgage?
The banks and other institutional lenders pay mortgage brokers' commissions for the mortgages they fund through them. The private lenders do not pay the brokerage any commissions and they pass that fee onto the borrower. Additionally, since privately financed mortgages carry more risk to the lender, private lenders will usually charge the borrower an additional lender fee along with a small legal fee. In some cases, the lender may require the borrower to hire their own lawyer to represent them.
Fees charged by private lenders can range anywhere from 2% to 10%. The higher the risk to the lender the higher the fees and interest rates will be for the borrower. Borrowers do need to pay for these fees out of pocket as they are usually included in the loan amount.
That means if you were to borrow $200,000 and the fees are 2% lender fees and a 2% broker fee, the total amount of fees would be $8,000 so the total loan amount you would be applying for would be $208,000. This makes it a lot easier for borrowers who are on a calculated budget to receive funds without added out-of-pocket costs.
Fees charged by private lenders can range anywhere from 2% to 10%. The higher the risk to the lender the higher the fees and interest rates will be for the borrower. Borrowers do need to pay for these fees out of pocket as they are usually included in the loan amount.
That means if you were to borrow $200,000 and the fees are 2% lender fees and a 2% broker fee, the total amount of fees would be $8,000 so the total loan amount you would be applying for would be $208,000. This makes it a lot easier for borrowers who are on a calculated budget to receive funds without added out-of-pocket costs.
How long does it take to get approved for a private mortgage?
While banks tend to take their time to just give you approval, private mortgages approvals can happen on the same day you apply. If you provide all the required information and documentation to private lenders you can receive the funds for your mortgage within a 48 hour time frame. It all depends on the location of the property and the size and complexity of the loan. The average time it takes to get funded is between 2-days to 21-days.
Lenders that specialize in private mortgage loans want to see their clients succeed over the course of the mortgage. They want their clients to be able to refinance the entire loan to a prime or more traditional lender as soon as borrowers are capable. Because these loans are short-term, and private lenders do not have to adhere to as strict regulations as the banks, private mortgage lenders can make much faster loan decisions. However, they also expect to collect their return on investment within a short period of time. For this reason, many of these lenders will work to help their borrowers to increase their financial standing so they can switch to a prime lender.
Lenders that specialize in private mortgage loans want to see their clients succeed over the course of the mortgage. They want their clients to be able to refinance the entire loan to a prime or more traditional lender as soon as borrowers are capable. Because these loans are short-term, and private lenders do not have to adhere to as strict regulations as the banks, private mortgage lenders can make much faster loan decisions. However, they also expect to collect their return on investment within a short period of time. For this reason, many of these lenders will work to help their borrowers to increase their financial standing so they can switch to a prime lender.
How can I qualify for a private mortgage?
Getting funded by a private Mortgage lender is much faster and easier than going through a bank or institutional lender.
Private mortgage monthly payments are also much lower than mortgages obtained by banks. The payments only consist of interest payments rather than blended interest and principal payments that traditional mortgages carry.
More and more borrowers are turning to private lending companies because they cannot meet the strict stress tests imposed by the Canadian government. For this reason, private first and second mortgages have become more popular with Canadians who are seeking mortgages and using the equities in their homes or commercial properties to secure first and second mortgages. As more people are turned down by banks due to the stringent mortgage stress tests, private lenders have become ever more popular amongst borrowers who don’t have the credit or income to be qualified at the larger banks and institutional mortgage lenders. People with bad credit or low income are still able to carry out their plans in homeownership with the help of private lending companies.
Our experienced private mortgage brokers at Toronto Private Mortgage will assess your situation and mortgage needs and pair you with lenders that can meet and exceed your mortgage requirements.
Private mortgage monthly payments are also much lower than mortgages obtained by banks. The payments only consist of interest payments rather than blended interest and principal payments that traditional mortgages carry.
More and more borrowers are turning to private lending companies because they cannot meet the strict stress tests imposed by the Canadian government. For this reason, private first and second mortgages have become more popular with Canadians who are seeking mortgages and using the equities in their homes or commercial properties to secure first and second mortgages. As more people are turned down by banks due to the stringent mortgage stress tests, private lenders have become ever more popular amongst borrowers who don’t have the credit or income to be qualified at the larger banks and institutional mortgage lenders. People with bad credit or low income are still able to carry out their plans in homeownership with the help of private lending companies.
Our experienced private mortgage brokers at Toronto Private Mortgage will assess your situation and mortgage needs and pair you with lenders that can meet and exceed your mortgage requirements.
Ways you can qualify for a private mortgage:
Since private lenders do not need borrowers to meet the same personal requirements as banks do, such as credit scores and income statements, they place most of the attention on the property value, property location and the condition of the property the mortgage is for. All of these factors play an important role in the fees and costs that private mortgages carry.
Once the location and property are accepted by the lender, the funds will be released a short time after.
The majority of private lenders do not exceed a loan to value of 85% and borrowers will have to provide a down payment of at least 15%. The average amount most private lenders loan out to borrowers ranges between 75% loan to value and 80% loan to value. At Toronto Private Mortgage we have been able to get our clients as high as 90% loan to value. The partnerships we built with some of the fairest and most reputable private lenders in Ontario allow us to provide our clients with services at a personal level and provide them with customized solutions according to their needs.
We inform our clients of the easiest and most cost-efficient path to obtaining a mortgage.
One of the most important pieces of advice we tell our clients is to provide as large of a down-payment as possible in order to receive the lowest interest rates possible. Private Lenders love to work with borrowers who provide assurance that they are committed and pose less of a risk to them. By providing a large enough down payment and decreasing the loan to value (LTV), lenders will offer you lower interest rates as they perceive you to be a less risky borrower.
Once the location and property are accepted by the lender, the funds will be released a short time after.
The majority of private lenders do not exceed a loan to value of 85% and borrowers will have to provide a down payment of at least 15%. The average amount most private lenders loan out to borrowers ranges between 75% loan to value and 80% loan to value. At Toronto Private Mortgage we have been able to get our clients as high as 90% loan to value. The partnerships we built with some of the fairest and most reputable private lenders in Ontario allow us to provide our clients with services at a personal level and provide them with customized solutions according to their needs.
We inform our clients of the easiest and most cost-efficient path to obtaining a mortgage.
One of the most important pieces of advice we tell our clients is to provide as large of a down-payment as possible in order to receive the lowest interest rates possible. Private Lenders love to work with borrowers who provide assurance that they are committed and pose less of a risk to them. By providing a large enough down payment and decreasing the loan to value (LTV), lenders will offer you lower interest rates as they perceive you to be a less risky borrower.
Things you can do to help you get funding easier and quicker:
Always be honest with your mortgage broker and never withhold important information that is related to your mortgage application.
Withholding important information can work against you as most lenders will eventually have access to all of your financial files if you decide to move forward. Always disclose if you have additional properties, or any debts in arrears as these things will be visible on your credit report. In the case that you do have other properties, they can be used as a cross-collateral and in turn, approve you for lower interest rates and higher mortgage amounts.
Being caught in a lie will diminish the lenders' trust in you and you will be denied a private first mortgage or a private second mortgage.
Only provide the requested information and don’t wait till the last minute to submit documents.
Acceptable ways of submitting your information can be through email, fax, or in-person delivery.
By following these guidelines will, you will gain the trust of your mortgage broker and Private lender and they will work together to get you the best mortgage term and lowest rate possible.
At Toronto private Mortgage we speak from experience and we can guarantee you that with our expertise and advice you will be approved for the mortgage that you desire.
Withholding important information can work against you as most lenders will eventually have access to all of your financial files if you decide to move forward. Always disclose if you have additional properties, or any debts in arrears as these things will be visible on your credit report. In the case that you do have other properties, they can be used as a cross-collateral and in turn, approve you for lower interest rates and higher mortgage amounts.
Being caught in a lie will diminish the lenders' trust in you and you will be denied a private first mortgage or a private second mortgage.
Only provide the requested information and don’t wait till the last minute to submit documents.
Acceptable ways of submitting your information can be through email, fax, or in-person delivery.
By following these guidelines will, you will gain the trust of your mortgage broker and Private lender and they will work together to get you the best mortgage term and lowest rate possible.
At Toronto private Mortgage we speak from experience and we can guarantee you that with our expertise and advice you will be approved for the mortgage that you desire.
Can I still apply for a private mortgage after my bank put me in a collateral charge mortgage?
Simply put, no you can not.
In recent years, banks have increasingly promoted collateralized mortgages to their clients. Despite the fact that your bank may have only loaned you $400,000 for a property that is worth $500,000, they may record your loan as being for the full amount of $500,000 and sometimes more.
The added security for the bank ensures that you will be unable to get a second private mortgage anywhere else unless your property value increases astronomically. As a result, you most likely have to turn to the bank, if you want to refinance or take out additional money using the equity in your home.
In recent years, banks have increasingly promoted collateralized mortgages to their clients. Despite the fact that your bank may have only loaned you $400,000 for a property that is worth $500,000, they may record your loan as being for the full amount of $500,000 and sometimes more.
The added security for the bank ensures that you will be unable to get a second private mortgage anywhere else unless your property value increases astronomically. As a result, you most likely have to turn to the bank, if you want to refinance or take out additional money using the equity in your home.
The pros of a private mortgage are:
Private mortgages can help people build and repair their credit ratings - As we have learned by now that private mortgages can be obtained by applicants with a low credit score. Once applicants receive the private mortgage funds and start making their monthly mortgage payments, their credit scores will start to rise slowly but surely. Other things you can do to increase your credit scores are keeping a low credit utilization and not exceeding 30% of your credit score. Never miss or have late bill payments and you will be on your way to reaching your desired credit score.
Low income and self-employed income are acceptable - People who are self-employed or in-between changing jobs and have a non-conventional way of declaring income are perfect candidates for private mortgages. Private lenders tend to focus more on the property the mortgage is for rather than the applicant's credit score or income.
Private mortgages are excellent for debt consolidation - If you have a lot of high-interest debts such as credit card debt or a personal loan or are in need of extra money to renovate your home a private mortgage can help you manage one or all of those things altogether. The benefit of a Private mortgage for debt consolidation is that the interest rates are substantially lower than that of other personal loans or credit cards.
Quick, and hassle-free approvals:
Private mortgages can be funded to borrowers fairly quickly, as there are no stress tests enforced, unlike with traditional lenders such as banks. Private mortgage companies are not required to follow the strict regulations that banks have to follow and can fund mortgages in as little time as 48 hours.
Low income and self-employed income are acceptable - People who are self-employed or in-between changing jobs and have a non-conventional way of declaring income are perfect candidates for private mortgages. Private lenders tend to focus more on the property the mortgage is for rather than the applicant's credit score or income.
Private mortgages are excellent for debt consolidation - If you have a lot of high-interest debts such as credit card debt or a personal loan or are in need of extra money to renovate your home a private mortgage can help you manage one or all of those things altogether. The benefit of a Private mortgage for debt consolidation is that the interest rates are substantially lower than that of other personal loans or credit cards.
Quick, and hassle-free approvals:
Private mortgages can be funded to borrowers fairly quickly, as there are no stress tests enforced, unlike with traditional lenders such as banks. Private mortgage companies are not required to follow the strict regulations that banks have to follow and can fund mortgages in as little time as 48 hours.
The cons of a private mortgage are:
Higher interest rates:
The interest rates and risks for private mortgages are always higher than those from traditional lenders such as banks. Due to the higher risks that are inherited by individual private lenders and private lending companies, the investment has to be made worth their while which in turn results in higher interest rates.
Associated broker fees and lender fees:
Because of the added risk, private lenders and private lending companies charge a separate lending fee and can range from 2% to 10% of the total amount of the mortgage.
Since Private lending companies do not pay brokers a finder's fee or a referral fee as banks do, the broker fee is passed down to the client. Not to worry as most brokers only charge a fair fee to cover their time, and effort plus associated costs.
All of these fees are included in the mortgage clients receive. Let say you are applying for $100,000 and your total fees are $6,000 the amount of money you would receive would be $106,000. In this example, the lender fees would be $4,000 and the broker fee would be $2,000.
These fees vary and are based on a case-by-case scenario.
If you're denied for any reason, don't hesitate to reach out - we'll work with you and come up with the right plan in 48 hours!
The interest rates and risks for private mortgages are always higher than those from traditional lenders such as banks. Due to the higher risks that are inherited by individual private lenders and private lending companies, the investment has to be made worth their while which in turn results in higher interest rates.
Associated broker fees and lender fees:
Because of the added risk, private lenders and private lending companies charge a separate lending fee and can range from 2% to 10% of the total amount of the mortgage.
Since Private lending companies do not pay brokers a finder's fee or a referral fee as banks do, the broker fee is passed down to the client. Not to worry as most brokers only charge a fair fee to cover their time, and effort plus associated costs.
All of these fees are included in the mortgage clients receive. Let say you are applying for $100,000 and your total fees are $6,000 the amount of money you would receive would be $106,000. In this example, the lender fees would be $4,000 and the broker fee would be $2,000.
These fees vary and are based on a case-by-case scenario.
If you're denied for any reason, don't hesitate to reach out - we'll work with you and come up with the right plan in 48 hours!