Private Mortgage Lenders & Non-conventional Financing
Maybe a private mortgage is for you!
Private mortgages are funded by individuals or groups who want to make a better return on their investment than a GIC at their bank (8-12% range, interest only). They are comfortable with investments that are secured by real estate and they will look past bad credit, bankruptcy, and environmental or zoning issues. Basically, they invest in people and property, not reports and numbers.
Some private mortgage investors only invest in residential housing, while some will look at commercial plazas. They each have their own appetite and lending comfort zone. Private mortgage investors will even look at farm mortgages, mobile home mortgages, and also at bare land. Every investor is different and that’s why you need a mortgage broker. One thing is for sure; they will listen to your story and make a decision based on all of the information. Canadian private mortgage investors look at things like bank statements, recent appraisals, and employment letters, whatever you can provide to show them why you and your property are a good investment.
Beyond Conventional Mortgages
8 Reasons Your Bank May Not Provide a Mortgage
Type of Zoning
Mixed use is a combination of commercial and residential units.
Where there are outstanding collections, late payments or bankruptcies.
Where someone owns more than 4 properties.
Not all of the income a person receives is disclosed.
When the debt service ratios are outside of the bank guidelines.
New to Canada
Where a person does not have established credit.
Properties that the banks do not typically lend on because of the type of business.
When a property is located outside of lending parameters.
When should you look at a private mortgage as a borrower:
- You already have a first mortgage with a bank and it would be too expensive to break the mortgage
- You need a small second mortgage
- You need to catch up on paying income taxes
- The amount you need to borrow is less than 80% of the value of your property and you cannot qualify at a bank
- You have a unique property such as a mixed use commercial/residential building
- You need short term money to get over a hurdle so that you can go to the bank after
Some rough guidelines and facts:
- Rates – typically higher than bank posted rate
- Term – 1 to 3 years, longer if there is a valid reason
- Payments – interest only and amortized payments are possible
- Brokerage Fees – depends entirely on the package – usually 1 to 5%
- Region – typically they invest in their own area but not always- Only in Ontario
- Approval – approvals can take 1 day to 2 weeks depending on the deal
- Funding – funding can happen in less than a week but generally in 3 weeks
To get access to private lenders and mortgage investors you generally need to deal with a Private Mortgage Broker and that’s where we come in!