Purchase a Home
Few Mortgage Brokers really take the time to get to know and understand Private Mortgage Lending. Often times they may know one or two local lenders with interest rates over 10%. What we do differently is we have taken the time to get to know all the Private Mortgage Lenders from coast to coast, learning what their client profile is, and interest rates and fees. Where a local private mortgage lender may have an interest rate of 10.75% - 14.00%, we have made arrangements with lenders from across Canada with rates starting as low as 4.88%.
Private Mortgages are generally short term mortgage loans ranging from six months to three years in length. Quite often they are interest only to reduce the payment amount, but some also include principal and interest. Private Mortgages are designed for situations where an odd property is being purchased, or there are credit problems and a bank won't approve the client, or the client is in foreclosure, or late on their mortgage payments and needs to bring their mortgage up to date, consolidating debt, property taxes, CRA tax, Collections, Judgements, Consumer Proposals and Bankruptcy. Private Mortgages can be first, second, or even third mortgages, and work for purchases, refinances, rental properties, and commercial properties.
-Your credit history stops you from being approved by traditional banks and credit unions
-You cannot prove your income
-You want to buy an unusual property (bad condition to be renovated, bare land, mixed use)
-You need a quick approval
-You need a short term solution
Private Mortgage Interest Rates (oac)
1st - 4.88-9.75%
2nd - 12-15%
3rd - 15%
*Rates may change without notice
-Individuals - Individuals willing to loan their personal cash seeking a return on their investment
-Syndicate - A group of individuals who pool their money together
-Mortgage Investment Corporation (MIC) - A group of investors, typically larger corporations than individuals or syndicates. Also often have the lowest rates
Interest Rates 4.88% - 11%*
Lender/Broker Fees 1-5%**
Term 6-36 months
Amortization 25 years or interest only
*on first mortgages, situations may arise such as second mortgages where rates are higher. On accepted credit, rates subject to change without notice. **Fees are approximate but may change based on situations and size of loan
Lets assume our borrower has run into some financial troubles, and has had to use personal loans and credit cards to get themselves through during a job loss. They have found a new job, but their credit suffered and they no longer qualify at a bank. They have a first mortgage at a bank for $150,000 with a payment of $780 that is coming up for renewal in a month, a car loan for $40,000 with a payment of $790 per month, and 4 credit cards with a combined balance of $20,000 with a minimum monthly repayment of $600. They also want to borrow $2000 to renovate their bathroom. Their home is valued at $300,000. The lender and broker fees are 3% of the total amount borrowed, legal fees are $1400.
Current Monthly Liabilities - $2170
New 1st Private Mortgage - $195,000 - 4.88% - interest only - $785 per month
New 2nd Private Mortgage - $25,000 - 12% - principal and interest - $257 per month
Our client is saving $1128 every month for 1 year. A total of $13,536
With all this extra free cash flow, the clients were able to obtain 2 secured credit cards for $1500 each, and managed their credit well during the year. At the end of the year, showing clean repayment history on their credit cards, and mortgages, they were able to return back to a bank for regular lending rates.
Private Mortgage Lenders are mainly interested in the property. Generally they allow up to 75% of the homes value to be borrowed, in some cases up to 85% (at a higher rate). Because they have a large equity position, many private lenders do not ask for proof of income. Just an appraisal to confirm the value of the property. Private lenders will want to see a copy of the clients credit bureau, however they will lend in virtually any credit situation.
Copyright 2016 - Chris Friesen