If you’re in a position where you can’t take a loan from a bank, have a less than perfect credit score, or are self-employed, looking for a private mortgage lender is a perfect choice. The best part is these private mortgages are financed through a private source of funds like family, friends, or a business. It’s quite handy for people struggling to get a mortgage the usual way.
There are many benefits of hiring a private mortgage lender, and below we’ll mention 3 ways it can help when purchasing a property.
What is a private mortgage?
A private mortgage is a type of mortgage loan where funds are sourced from another person or business rather than the usual way of getting a loan through a bank or other finance provider. If it’s executed correctly it can benefit everyone involved, however, one must take precautions for the relationship as well as the finances, if things go badly.
Qualifying for a private mortgage is easier since a private mortgage lender will base their decision on the asset used for collateral, as opposed to banks that require a lot of documentation, and sometimes the borrower’s finances may not be enough for the bank’s preferences. Some of the downsides of a private mortgage include higher interest rates, and they’re usually short-term between 1 and 3 years.
3 ways a private mortgage lender can help when purchasing property
Turning to an alternative way of taking out a loan like through family or friends, can be quite beneficial for both sides. There’s a lower interest rate, flexibility in paying back the money, and federal tax deductions.
Fast approval
Private mortgage loans are much easier to get approved and require less time and effort on the part of the borrower. The application is easy, and the mortgage is offered regardless of your credit history. If the property value is high enough and the income from it is sufficient to pay the interest on the debt, the borrower’s financial situation won’t matter to the private mortgage lender’s decision.
Getting approval for a loan from a private mortgage lender will take less time than a conventional loan. The approval might take between 2 or 7 days, and you can also get a fund for your mortgage in as little as 48 hours. This is beneficial if the closing date of the sale and the purchase of a new property is approaching.
No minimum income or credit score requirements
The private lender will place more emphasis on the property rather than the income of the borrower. This would be the best mortgage solution for self-employed people or those who have a non-conventional way of declaring the income. The best part is that even if you don’t currently have a full-time job, you can still qualify.
Often, private mortgage lenders don’t have minimum requirements for the borrower’s credit score since they approve based on the value and marketability of the property. If you’re unable to confirm your income, the private lenders will use the value of the property as security against the loan. Additionally, a private mortgage can help you repair your credit if you keep up with your monthly obligations.
Debt consolidation
If you have unsecured debt like credit cards, overdue bills, student loans, and such, you can consolidate the debt and reduce your repayment commitments by taking out a private mortgage. This will help you reduce the interest rate and improve your credit score.
By consolidating all of your higher interest rate bad debts into one substantially lower monthly payment you will be able to free up cash flow and pay down the debts faster. These loans are usually granted regardless of your credit score and can help prevent you from being in arrears on future payments.
Risks of mortgage loans
When taking a private mortgage loan one must always consider the risks that come with it. Firstly, introducing a loan into a relationship can be tricky since money can get tight for the borrower thus causing extra stress and guilt if they’re not able to make payments.
Also, note that circumstances can change and the lender’s financial situation may change. You must evaluate the lender’s ability to take on that risk, and whether there are others dependent on them like children or a spouse. Bear in mind that the property value may fluctuate and maintenance can be expensive.
Final thoughts
If you’re thinking about private mortgage loans, then make sure you consider all important aspects before committing to them. Think about who would be the best lender, and whether you can overcome the risks mentioned above. Although it’s not an easy task, it’s still quite convenient if you cannot acquire a loan the usual way.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
