Many Real Estate Investors ask about Private Mortgages
Most Canadians are not familiar with the concept of private mortgages.
There is nothing inherently complicated about Private Mortgages - they're
just unfamiliar territory for many. Private Mortgages fill the gaps
that the Institutional Lenders, such as the banks, are unable or unwilling
to fill. They offer an alternative source of financing to borrowers
What are Private Mortgages?
Private Mortgages are funds that come via Private Individuals who lend
out for Investment purposes.
Who are the Lenders?
In most cases Private Lenders are retired individuals who are looking
for a better rate of return than is available to them at a Bank. They
are willing to fund mortgages as they can usually generate a greater
return for their investment dollar.
Why use Private Funds?
The traditional Institutional lenders are usually conservative by nature
and like to deal with mortgage transactions that meet their normal lending
criteria. As Institutional Banks become bigger and interest rates become
lower, the requirements for “perfect” deals increases and
deals that do not fit their mould are either cut back or summarily declined.
Private Mortgages have filled the gap left when the small Trust Companies
left the Canadian scene in the nineties.
Real Estate Investors seek Private Mortgages for a number of
reasons.Typically, for reasons of a “unique deal,”
expedience, credit issues, self employment, or when a borrower cannot
qualify under the large number of requirements that the conventional
lending sources need to be satisfied before they are able to lend.
What are the Interest Rates on Private Funds?
Private mortgage lenders base their rates on the area, type of property,
degree of risk they perceive, and estimated costs of administration
(collection). Interest on Private Mortgages typically range between
9% for first mortgages to 16%+ for second and subsequent mortgages.
What will the Broker require in order for me to qualify?
The Broker will require a current appraisal, Credit Bureau.
What do Private Mortgages cost?
Typically a Borrower will be charged 3% of the funds borrowed. As well
the Borrower is responsible for the Appraisal fees, Legal costs of the
lender.
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