Traditional lenders are usually conservative by nature and therefore like to deal with transactions that meet their institutional requirements making it sometimes difficult for those individuals who do not fit into the typical mold.
Private Mortgages are, generally, short-term, interest-only loans. They are an alternative lending option for individuals that might not qualify for loans/mortgages through typical channels.
There are a number of reasons that someone might seek out a Private Mortgage. While it is a common thread that many individuals seeking alternative solutions would not have qualified for loans from traditional lenders, the reasons for this can vary widely. Perhaps the property being purchased is unconventional and wouldn't be approved for typical financing options. Or maybe you're facing a time constraint and can't wait for the usual approval process.
It is NOT the case that everyone needing a private mortgage has bad credit. Some other reasons individuals seek out private lending: Bridge Financing, Construction Mortgages, Debt Consolidation, or Non-Verifiable Income (to name a few!) - we have expanded on a number of reasons you may seek out this type of loan below!
A few of the biggest ways in which Private Mortgages differ are as follows:
Short-Term: Where many traditional mortgages have an amortization period of around 25 years, Private Mortgages generally only have a term of around 1-3 years.
Interest Rates: It is to be expected that mortgages obtained through alternative channels will not have the same interest rates seen with a traditional mortgage. The interest rate you qualify for depends on a number of factors, but remember that these loans are designed for short-term use in situations where approval for all other options has been ruled out.
Payments: With a traditional mortgage, your payments go towards reducing the principal and the interest on the loan. With a Private Mortgage, your payments go only towards the interest. This is one of the main factors in this type of loan being a short-term solution. It is also why most will attempt to transfer their Private Mortgage to a more traditional solution at the end of the term.
Every private lending scenario will look a little bit different - but there are a number of common factors that will be evaluated if you've applied for a private mortgage:
The type of property and the value of the property are significant factors in the approval process. What condition the property is in, where it's located, and the appraised value will be considered by lenders on a case-by-case basis.
Your income will also be considered. Confirmable? Non-confirmable? If your income can't be verified through a Notice of Assessment, lenders may need to estimate your income as part of the approval process.
Equity and down-payments are hugely important. Some lenders may have a maximum percentage in loan-to-value that they're willing to provide when financing/re-financing (often 75% - 85%). When purchasing, you may be required to make a minimum percentage down-payment, which is usually the difference of the loan-to-value amount.
Closing on a new home before your existing home sells? This could mean you do not have access to the equity in your current home to make a down-payment. This is where Bridge Financing can help ‘bridging’ the gap that traditional lenders often cannot fill.
Second mortgages can provide a solution for debt consolidation or significant life events that have large cash requirements. Many lenders are unable to support additional mortgages, but private lending can serve to open up new opportunities for you.
These loans (also called Building Loans) are designed to be short-term solutions to help finance contruction/renovation projects that may not qualify for traditional lending or construction mortgages – interest is paid only on the amount used during construction.
Outstanding debts to CRA can impact your eligibility for further personal/business financing through normal channels. Our private lending network can help you eliminate CRA Debt and move forward with your plans, with minimal interest implications.
Do you need to take back control of your debts? Perhaps the structure of your debt prevents you from obtaining any form of new financing. Alternative Mortgages can help provide solutions to consolidate your debt and limit the interest you incur.
At Alternative Mortgage Solutions we understand that bad things happen to good people and that is why we are not here to see “through people” but to “see people through”. If you are in need of a Private Mortgage, you have usually exhausted all other possibilities. Your bank may have turned you down and you may be running out of ALTERNATIVES. Private mortgages may only be a short term solution, but if it fills the gap and if done right, it could bring long term gains!
Other reasons to use private lending may be the need to re-establish your credit rating or maybe an entrepreneur has a dream for a new business, or maybe your situation simply does not fit the traditional mold. Whatever your financial situation and as unique as it may be, if you have equity in your property, a private mortgage could be the ALTERNATIVE you have been looking for. Private mortgage lending in New Brunswick.
Together we can make a difference!
Come in and have a discussion with us – our Team is here to help. If we don’t come up with a SOLUTION, the experience won’t cost you anything!
