More homeowners are turning to this lending option for their mortgage needs.
Considered for mortgage situations of last resort because of the extra expense and risk, a private lender can be a viable alternative — unless we help you find a less costly solution first.
A private lender falls outside the typical mortgage offering. It doesn't have to adhere to the same laundry list of mortgage qualifications required by traditional banks or alternative lenders.
There's no mortgage stress test to worry about and no heavy factoring of credit standing or income sources. Your loan approval is primarily based on the amount of equity in your home, its condition, and location.
But it's not all happy-go-hippo as an alternative lending choice. The seemingly 'easier' criteria will cost you more and can come with increased financial risk. Plus, access isn't open to just anyone, as private lenders can be quite particular about loaning out their cash.
We can help you decide if a private lender is the right fit. Or, even better, find a customized solution that can save you more money, time and stress.
Private mortgage lenders use their own private funds and capital to lend you (mortgage) money, coming from personal, business, or investor sources rather than 'public' depositors or government securities.
As an alternative mortgage category in its own right (often referred to as 'C' lenders), private lenders can range from reputable companies to individuals who just happen to have extra cash.
These loans aren't subject to the same stringent federal or provincial regulations as traditional (A) and alternative (B) lenders — which means you're charged higher mortgage rates and fees.
A private lender can also structure their own mortgage terms, which is why having your own lawyer review the contract is essential to understand the fine print.
Where do traditional and alternative lenders (including non-bank lenders) get their funds to loan? The money comes from a mix of sources, including public client deposits (e.g. savings and chequing accounts), bonds and securities, interbank lending, and capital markets.
To be approved for a private loan, the lender typically focuses on:
Compared to a traditional mortgage product:
When dealing with a private lender, it's essential to have your own lawyer look over your mortgage contract. We also recommend talking to a financial advisor if you have credit challenges.
Typically, private and alternative mortgage products help solve a short-term mortgage need, with the home buyer or owner resolving to get back to renewing (or refinancing) with a traditional lender and better rates.
However, within the current higher interest rate environment, many banks have tightened their mortgage qualification criteria (especially as the governing banking body, OSFI, outlined stricter regulations).
As a result, a larger share of mortgage borrowers have to renew their private loans, unable to qualify and switch to traditional products.
History shows that many home buyers and owners will go to great lengths to buy or keep their homes — and private mortgages can play an important role in achieving those goals.
So, if you need a private lender solution, it's important to consider whether its renewal plan fits your situation to help you reach your mortgage goals.
At True North Mortgage, our highly trained brokers have access to several lenders — traditional (A), alternative (regulated B lenders), and private. The latter two typically come with higher rates and fees, as your mortgage loan comes with a higher risk to the lender.
We have the flexibility to help match you to the right lender and product, including our new Compass Mortgage™, which offers greater flexibility to include non-traditional income sources or more complex situations.
A private mortgage may be the right fit, but we'll first ensure there isn't an alternative option that works better for your situation.
Rounding out your mortgage costs, here's where we can often save you money for the right alternative fit vs the extra costs a private lender might charge:
Most importantly, we're upfront and transparent about outlining your details and options to help you make clearer decisions. We're here to help!
Don't fit the mortgage mould? We can help customize your solution.
Get more flex in mortgage approval criteria to buy or keep a home.
Damaged credit or don't have a traditional income source? We can outline your equity-based options.
