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A private mortgage is an alternative source of financing given to a borrower by a private mortgage lender in Ontario and is usually sought after as an alternative to a mortgage loan from a traditional bank or lending institution. NerdWallet defines private mortgages as “a loan offered by an individual or institution to prospective homebuyers and current home owners who are unable to secure a traditional loan from a financial institution, like a bank.”
Sometimes traditional borrowing is not an option due to scenarios such as bad credit, not being qualified for A-lending, being new to Canada, and many more scenarios. When dealing with a private mortgage broker in Ontario, borrowers usually seek short-term interest-only loans ranging from 3 months to 2 years. Private mortgage lenders are individuals or organizations who wish to invest their surplus cash for short terms to make profits from private mortgage loans. They lend money for property purchases and refinances secured by the property as collateral.
Private mortgages in Ontario are generally given for 3 reasons: as a favor, for an investment, or a combination of both. Private mortgage terms are usually negotiated on the Loan-To-Value (LTV) or around the length of the loan, down payment amount, mortgage interest rate, and type of loan on your property. In certain situations, there are additional rules or laws about the maximum interest rate allowed based on the use of the property.
Private mortgage lenders can offer a variety of different types of loans, including:
Who gives private mortgages? Private mortgage lenders in Ontario are generally investment groups looking for alternative and diverse investments.
Don’t wait on your next mortgage in this market. Get the best private mortgage loan rates in Ontario. Whether you are looking for a private mortgage lender in Ontario as a first-time buyer or looking for a private mortgage for bad credit, Approved Equity has a proven track record to get you approved in seconds.
Canadian home buyers are increasingly considering private mortgage lenders to secure mortgages as rates rise in 2023. The percentage of mortgage refinancing transactions done through private lenders grew 67% over the last few years.
What is the difference between a private lender and a bank? The main difference between getting a loan from a bank versus a private lender is that the private lender will generally accept riskier loan customers than a bank. However, the interest rates from private lenders tend to be higher than interest rates from banks. Private mortgages are perfect for homebuyers looking to get approved quickly, without the hassle of dealing with a commercial bank.
Below are some illustrative situations where taking mortgages from private lenders can be a suitable option for homebuyers in Ontario:
You are trying to buy an unconventional property that a bank or another lending institution is not willing to finance.
You need a short-term loan for only a few months to a few years.
You need quick financing without having to wait for long approval processes.
You have a bad credit history and are being repeatedly turned down by banks and institutional lenders for a mortgage.
You have unverifiable income and this is proving to be a roadblock in getting a mortgage for your dream home or any other property.
Most private mortgage lenders in Ontario will ask to see an appraisal report for your property if you’re refinancing or purchasing in order to determine the condition of the property. For commercial properties, private mortgage lenders may want to see a rent roll to help determine your ability to make your interest payments as well as an appraisal report and sometimes an Environmental report for Phase 1 and/or 2.
In times of economic uncertainty, private mortgages can be a lifeline for many people. Private mortgages can help you take advantage of the earning and investment potential of properties you already own or help you get started investing in real estate.
Approved Equity can help take care of all of this for you. If you’re ready to find a private mortgage lender in Ontario, contact Approved Equity and we’ll go through this entire process with you and lend our years of experience today.
Private lender mortgages in Ontario are easy to be qualified for. Most private mortgage lenders in Ontario will approve loans with at least 20% available equity on your home. If you have a property worth $1 million with a mortgage worth $800,000 mortgage, then you can get a private mortgage in Ontario up to 80% of the appraised value. In some cases, Approved Equity has private mortgage lender’s that will go up to 90% of the appraised value of your property.
Generally, most private mortgage lenders in Ontario will ask that you have your property evaluated as part of the mortgage agreement. Alternatively, the will can also consolidate an assessment fee into the startup fee for your private mortgage loan. An up-to-date appraisal report is important for figuring out the size of the private mortgage loan you’ll qualify for. The equity rate is often a little higher when trying to get private mortgages for commercial properties, usually around 35%. This means for private commercial mortgages, most private lenders will lend up to 65% Loan-To-Value (LTV). In some cases, Approved Equity has private mortgage lenders that will go up to 80% of the appraised value of your commercial mortgages.
This is the main difference between getting a mortgage from a private lender in Ontario in 2023 vs a traditional lender. Private mortgage lenders in Ontario usually focus mainly on the current market value of a property and equity in the property, when considering approving a loan. Whereas banks are more critical of your credit history and income verification when deciding whether or not you qualify for a loan.
What that means is even if you have bad credit or you have credit card debt and no income. you can still be able to qualify to receive a loan from private mortgage lenders in Ontario.
Traditional banks will allow you to only borrow up to 80% of the value of your current home on a refinance. Private mortgage lenders in Ontario can allow you to borrow up to 90% of the value of your home. Other private lenders may even allow you to borrow up to a 95% Loan-To-Value (LTV) in some cases.
Private mortgage lenders in Ontario use a metric called Loan To Value (LTV) ratio to determine if a property is worth it to invest in. The Loan-To-Value (LTV) ratio is an assessmentt of lending risk that financial institutions and private lenders examine before approving a mortgage. To determine the Loan-To-Value (LTV) ratio, divide the existing mortgage balance on a property by the current market value of the property. If a property is worth $1 million with existing mortgages of $800,000, the Loan-To-Value (LTV) ratio would be 80%.
An LTV of 80% or lower is a typical private loan requirement. Some private loan lenders will extend a private mortgage for LTVs of 85% to 90% for purchases and refinances. However, 80% LTV is common for purchasing a home for most homebuyers in Ontario.
Most private mortgage providers are interested in investments with ROI in mind. An unusually high LTV means a borrower already has a large amount of pre-existing loans taken on their property. If the borrower defaults on their mortgage payments, the primary mortgage lender would be paid back first. Properties that have high loan-to-value (LTV) ratios are less likely to recover on those investments.
LTVs aren’t the only criteria that determine private mortgage rates or interest rates. Having a steady income and a solid credit score can also help but aren’t the main deciding factors like it is with a traditional mortgage.
Private lender mortgages in Ontario provide benefits for borrowers and lenders alike. They are a popular choice of alternative mortgages for many reasons.
Private mortgage requirements are more flexible and less stressful than those of a traditional mortgage lender. Stress tests, bad credit, and more can keep many people from qualifying for a mortgage. This makes them one of the prime reasons why homeowners get private mortgages. Many people look for private mortgages to rehabilitate poor credit, or look at a private mortgage loan in Ontario for debt consolidation or home renovations.
Traditional mortgages have a lengthy approval process and require a lot of red paper to go through. Private mortgages involve less paperwork and have fewer regulations than traditional mortgages. Private mortgage lenders in Ontario don’t deal with large financial institutions as banks do. This also makes them advantageous for people with unconventional financial situations, such as those who are self-employed or with short credit histories.
Private mortgages tend to be a much quicker form of financing than traditional mortgages. Getting a mortgage with a bank usually requires a much more time-consuming and tedious approval process. Getting approved for a private mortgage is a much quicker and less stressful process. Traditional mortgages are often restricted to a few common forms. This means you’re severely restricted in the available terms. Private mortgage loans in Ontario can be much more flexible, giving you more options for finding terms that meet your specific needs.
Homeowners should meet three main criteria to get the best mortgage rates from a private lender. The first and most important criteria for getting a private mortgage in Ontario is a low Loan-To-Value (LTV). The lower the LTV ratio, the lower the amount of risk for the private mortgage lender in Ontario. This means you will have an easier time qualifying for a home loan as the lender could still have an optimal chance to recoup the investment. This also means you will get a more competitive offer with a lower LTV on your loan request.
Your income is the second most important factor for qualifying for a private mortgage in Ontario. This also helps ensure that the private loan will be a good investment for the lending company.
The last and third factor that private mortgage lenders in Ontario look at for determining a mortgage rate is your credit score. A good credit score isn’t universal. A good credit score in Canada is 700 or higher. 900 is considered a perfect credit. 550 – 680 is considered fair credit. Many traditional lending institutions will still give a mortgage for fair credit, albeit at a higher interest rate. What is the average interest rate on a private mortgage? Private mortgage lenders in Ontario will typically charge between 5-13%, but this depends on the Loan-To-Value, the location of the property, the purpose of the loan, the length of the loan, and the relationship between the borrower/mortgage broker and the lender.
That means if you’ve got bad credit, private mortgages in Ontario can sometimes offer a better deal to the borrower.
There are many reasons you might be looking for a private mortgage in Ontario.
Flexibility allows for quicker approval for qualified borrowers, allowing them to get their mortgages in a more timely manner. Qualifying for a short-term loan in the event of unforeseen circumstances such as debt consolidation, to help bring down the balance on high-interest credit card bills.
Refinancing for Home Repairs or Renovations
Seeking ways to fund the renovations of your house is a common reason for seeking a private mortgage in Ontario. Your private mortgage broker will specifically seek out a special type of mortgage, known as a Renovation Mortgage or Renovation Loan to cover repairs or renovations.
Unforeseen unemployment situations or unexpected expenses are typical reasons to consider private mortgages in Ontario. Private mortgages in Ontario are often issued for short-term loans. They’re also far more commonly available for borrowers with extenuating financial circumstances such as being self-employed or having an imperfect credit history.
The main benefit is, that private mortgages can often be approved much more quickly than a more traditional loan. This makes private mortgages far more desirable for those looking for income or a line of credit in a hurry. A private mortgage can even be an investment in and of itself, if you find a particularly good deal your mortgage will help you take advantage of it.
Avoid Foreclosure or Power of Sale
Private mortgages can help avoid foreclosure and the power of sales on your property.
It’s common for people to juggle many types of debt in this current economic climate. Traditional lenders don’t always take this under consideration, however, making it difficult to leverage real estate or home equity to help pay off debt. If you’re smart, you can even use your 2nd mortgage to pay off an existing second mortgage that is in arrears. Approved Equity has a proven track record of helping many home owners all across Ontario keep their homes even after several months of mortgage arrears. We simply take matters into our own hands by replacing the mortgage that is in arrears with a new private mortgage from out extensive list of qualified private mortgage lenders.
Getting a private mortgage in Ontario for buying a home or investment property is a popular option for many home buyers and investors under this current economic climate in 2023.
Buying a home without the traditional income and credit qualifications of a bank makes it more attractive for homebuyers and investors to get their foot into the real estate market.
Buying a fix and flip property is also much easier to close with a private mortgage as our private mortgage lenders in Ontario can fund these deals quickly and without the red tape the banks have.
Selecting a private mortgage is similar to choosing a traditional loan. Figuring out how much you can afford, and the length of the mortgage is the most important aspect of the process. Calculating private mortgage lenders in Ontario rates is easy with Approved Equity.
Reach out to our representatives and we’ll help figure out the best private mortgage options for you. We help you figure out what you can afford, and then we find the best terms for you with the lowest rates and fees. Saving money for a downpayment for a home is sometimes recommended to get a better rate on a private mortgage. This can help you get a lower loan-to-value ratio (LTV), which can help you negotiate lower interest rates, just like with a traditional mortgage from a bank.
These factors are taken into consideration to find the optimal criteria for a private mortgage lender in Ontario. Traditional mortgages are almost always long-term, such as the 30-year mortgages. However private mortgages can come in a variety of lengths. Private mortgages are usually 3 months to 2 years. Most private lenders offer a 1 (one) year term as well by default.
All of these factors can help you determine the best interest rate for a private mortgage in Ontario. The interest rate is probably the single most important factor in choosing a mortgage.
Mortgage rates are constantly changing, especially under the current economic landscape. To find the best rate on a private mortgage in Ontario, reach out to us to get the best advice on interest rates in the market.
Private mortgage interest rates can vary. Generally, the private mortgage interest rate for first mortgages ranges from 3.99% to 8.99% in 2023. For second mortgages, the interest rate can range from 5.99% to 12.99%.
Get a quote in 30 seconds for private mortgage interest rates in Ontario for your first or second mortgage.
Private mortgage lenders in Ontario can offer a variety of loans including:
Approved Equity specializes in these types of private mortgages, and more. Reach out and close your next mortgage in 24 hours.