Private Mortgage Lenders for Ajax, Whitby, and Vaughan
If you've tried to apply for a mortgage at a traditional lender and were unsuccessful, you may want to try using a private mortgage lender. In Ajax, Whitby, and Vaughan, private lenders have become a popular mortgage option for people who have been turned away by banks due to the banks' conservative lending criteria. Banks mainly take into account the borrower's ability to pay off the mortgage. Private lenders primarily focus on the value of the property itself rather than the borrower. Most private mortgages are meant as short-term loans. For this type of mortgage, the monthly payments are usually interest only and the mortgage term is usually one year.
Under What Circumstances Should You Use a Private Lender?
There are a number of reasons why people use private lenders, some common reasons include:
• You are trying to purchase an unusual type of property
• You are facing legal circumstances that complicate getting a mortgage
• You need the money quickly and can't wait for a bank to process the mortgage
• You have poor credit or have been through bankruptcy or consumer proposal
• Your income source is difficult to verify
Rates and Fees for Private Lender Mortgages
Since private lenders take on riskier mortgages, they charge more than banks and other larger lenders. For this reason, it's recommended to seek out a private lender once you've confirmed that you cannot qualify at a bank. Rates for a private lender mortgage can range from 7-15% depending on the condition of the property, its location, and the existing debts registered against the property. With a private lender mortgage, there are also various fees that must be paid either upfront or included in the mortgage amount. These fees go to the mortgage broker, the lender, administrative staff, real estate lawyers and usually cost somewhere between 3-5% of the value of the mortgage.
Private Mortgage Lender Specializations
Some mortgage lenders choose to focus on lending in specific regions or to people in specific circumstances. Some examples of the ways in which lenders specialize include:
• Lending on Only Commercial or Residential Properties: Each property type has different features that increase their value and a lender needs to have a deep understanding of the property's value to make wise investments.
• Lending for Specific Uses of the Mortgage Funds: Some lenders will only provide first or second mortgages when they are used for the purpose of renovations, debt consolidation, or stopping power of sale.
• Lending Only In Large Cities: Properties in large cities are usually more valuable and have more demand. If the property in a large city needs to be sold, it can be done quickly.
• Lending in Their Local Area: Some lenders prefer to lend on land or properties that are geographical close to them. This allows them to personally inspect the property and determine its true value.
What Criteria Will Private Lenders Look at?
Generally, private lenders will have flexible requirements when it comes to credit score and income, but strict requirements when it comes to the value of the property and the value of its debts. Most lenders can quickly approve a property based on its location and its Loan to Value (LTV) ratio. A property's location can determine how volatile its value is and how easy it will be to sell. The LTV ratio of a property measures the level of debt registered on a property. The LTV ratio of a property is equal to the value of its debts divided by its estimated selling price. Most lenders will not lend against properties above 80% LTV and will require lower LTV ratios for properties in less desirable geographically areas.
Timeline for a Private Lender Mortgage
Private mortgage lenders usually work much faster than banks do. Most private lenders can complete the mortgage within 2 weeks, in contrast, a bank mortgage can take several months. Private lenders are not bound by the same government regulations as banks and require less paperwork than banks. Private lenders can also provide a response more quickly and are usually able to approve or decline a mortgage application within 48 hours. Once the term of a private mortgage is done, many private lenders will assist the borrower in replacing their mortgage with a lower cost one from a traditional lender.