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Private Mortgages

Wilson Team

How to Use a Private Mortgage

A Private Mortgage Might Be Right for You
There is a stigma attached to private mortgages and it needs to end. Private funds are one of the largest growing financing segments in Canada. With Canada’s stricter mortgage rules, it is making alternative financing more popular than ever. From 2016 to 2019 the percentage of private mortgage transactions grew from 12 per cent of all mortgage lending to 20 per cent, is a 67 per cent increase.

Private money is all about equity lending, an arena where the banks used to be able to compete. Equity lending means that when a client has great credit and pays their bills, but doesn’t not have the traditional income to support the lender’s stiff guidelines, they are able to borrow against the fact that they have good equity built up in their homes.

Private Mortgages Explained
A private mortgage is mortgage funded by private investors. Generally, it is a short-term loan of one to three years that provides bridge financing to get you started on the path to equity and gives you the ability to refinance with a financial institution. The private mortgage is generally available for up to 85 per cent of your potential equity in a home. For example, if you plan to purchase a home for $100,000, a private mortgage would provide up to $85,000. In some circumstances there is the ability to go higher than the 85 per cent. Each case is analyzed based on situation, exit strategy and reason for the funds.
What Are the Major Benefits?
Private lenders aren’t obsessed with every detail of your financial life and are more flexible in their thinking about what constitutes a reasonable risk. The investors are looking at sustainability, exit strategy, type of property, and equity. Its make sense lending. You can get terms from 3 months to 3 years.

You also get personalized service. We at the Wilson Team of Mortgage Experts will strive to offer you a choice of private lenders, investors and alternative options. rather than a single option, and we will ensure that they understand your situation and your needs.
Private lenders may also facilitate your move to a bank loan after a year or two, rather than leaving you to fend for yourself. Investors of this type are interested in loaning money and getting quick returns on their investment, so private mortgages are designed to be short term.

What Are the Key Criteria?
Since you are potentially a higher-risk client than the traditional buyer, based on your credit history, your income or the type of property you plan to purchase, the private lender will look seriously at a variety of factors in making a decision:
In Closing…
If you’d like to close on that property sooner, rather than later, and banks aren’t a viable or preferred lending option, a private lender could be right for you. Give us, the Wilson Team of Mortgage Experts, a call and we’ll be happy to connect you with a lender who meets your needs.

Why Go Private?

The world is full of lenders, including big banks, local credit unions, and online lenders. So why not just fill out an application and borrow from one of them?

Understand the Risks

Life is full of surprises, and any loan can go bad. Of course, everybody has good intentions, and these deals often seem like a great idea when they first come to mind. But pause long enough to consider the following issues before you get too deep into something that will be difficult to unwind.

Private Mortgage Agreements

Any loan should be well-documented. A good loan agreement puts everything in writing so that everybody’s expectations are clear and there are fewer possible surprises. After several years, you (or the other person) may forget what you discussed and what you had in mind, but a written document has a much better memory.

Secure the Loan

It’s wise to secure the lender’s interest — even if the lender and borrower are close friends or family members. A secured loan allows the lender to take the property (through foreclosure) and get their money back in a worst-case-scenario.

How to Do a Private Mortgage Correctly

If you’re considering a private mortgage, think like a “traditional” lender (although you can still offer better rates and a more consumer-friendly product). Imagine what could go wrong, and structure the deal so that you are not dependent on good luck, good memories, or good intentions.

For more information contact The Wilson Team or call 613-695-9250

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