Is your credit history not the best? Are you fed up with getting your mortgage application rejected by traditional lenders? Or are you looking to purchase an unconventional property and flip it? Irrespective of the reason, if you are finding it difficult to get a loan from a bank, you might want to consider a private mortgage lender.
However, you must be cautious, as taking a loan from a private lender comes with certain risks. Before you make a well-informed decision, you might want to know where they come from and what you need to know before applying for a private mortgage.
The team at Mortgage Loan Ontario has a wealth of experience working with several private mortgage lenders to help you make the right decision that suits your specific needs.
What Is A Private Mortgage?
A private mortgage is a financial instrument where the borrower and a private lender i.e An individual or organization provide financing to the borrower to buy a house. Lenders will provide private mortgage to friends, family, or even others with personal relationships.
A few may consider this option because they cannot qualify for a conventional mortgage because of their poor credit history, or they want to avoid the tedious process of securing a conventional loan. A private mortgage works similarly to a regular one, where you must pay back the principal amount and interest within a specified period.
In the event, you default on your payment, the lender has the right to take the property and sell it to recover the money.
How Does A Private Mortgage Work?
Private mortgage play a vital role in the real estate market. A conventional mortgage is secured by a traditional lender like a bank, credit union or mortgage lender. Private mortgage are secured through a private lender or organization. They give individuals the opportunity to purchase property that a traditional lender will not approve.
Private mortgage are short-term in nature and are useful if you require immediate funds. A private mortgage is the best route for real estate development and construction because of the short timeline.
If you are looking to apply for a private mortgage in Ontario, please do not hesitate to contact Mortgage Loan Ontario today.
Why should I consider a private mortgage lender?
1. They have fewer requirements
One of the requirements for applying for a private mortgage is that it has fewer requirements when compared to traditional lending institutions. The only caveat when borrowing when choosing private lenders for mortgage is that you must have sufficient built-up equity in your home.
When there are lesser requirements, it is very easy to get your loan approved. Most lenders will have an extensive requirement wishlist, and more than often, there is a chance you can have your loan application denied.
2. Flexible loan options offers
When applying for a loan, you need to take into consideration the interest rate, loan fees, and other requirements. A private mortgage lender will allow you to negotiate all the above-mentioned terms, and you can choose the right mortgage that suits your specific requirements.
You can rely on us to help you make a well-informed decision when choosing the right lender. With flexible loan options, these loans are among the best options available.
4. Complete control over the process
When you apply for a private mortgage, you have the freedom to determine the terms of your private loan. It allows borrowers to control the process to an extent. You can make the best decision without sacrificing anything.
The borrower and lender don’t need to follow the strict lending guidelines you would find with a conventional loan. You can negotiate the loan terms with the lender to determine favourable terms and rates.
5. Using your property as collateral
A borrower is more likely to stick to the scheduled mortgage repayments when their property is used as collateral. A private lender is not concerned if things don’t go according to plan. Additionally, the borrower will be able to secure a larger loan amount with collateral. They can also get their loan request approved quickly and easily.
6. Improves the borrower’s creditworthiness
Private lenders for mortgage can improve your credit score and history if you take out a loan from them. Based on your current financial situation, and how impacted you are by debt, your future financial history can be significantly impacted.
Lenders will have more faith if you borrow and pay on time. A track record of 12 months is required by lenders to make sure the borrower has a good credit history with private loans.
7. Getting your mortgage approved and funded immediately without any hassle
Private lenders are the best alternative because they approve your loan application quickly. The money will be credited to your account instantly. It could take a matter of days or weeks for approval. The only thing you have to ensure is everything is in place during the mortgage application process, including arranging an appraisal as quickly as possible.
Private Mortgage Lenders vs. Traditional Mortgage Lenders
A conventional mortgage is provided by a traditional financial institution like a bank or a credit union. There are certain guidelines, restrictions and criteria the borrower must abide by to secure the loan. The guidelines are usually set with the consent of the federal government. This is enforced to protect the interests of the borrower and lender.
A private mortgage ensures you have a personal relationship with the lender. This means you will get a private loan from a friend or a family member. When you get a loan to purchase a house from someone you know, there are many obstacles to jump and restrictions in place. If you are still considering purchasing a loan from a traditional mortgage lender, you can go ahead and get started on the approval process and see if you can qualify.
However, if you are looking for quick funding to pay for the down payment, the team at Mortgage Loan Ontario can help. We will be more than happy to address any queries that you may have.
Pros And Cons of Private Mortgage
When trying to secure a traditional mortgage, the biggest reason someone may avoid getting one is guidelines and restrictions. A private mortgage is a fantastic alternative for borrowers who struggle to secure a mortgage based on their credit history and financial situation.
However, a private mortgage can be a risky option, and in some cases damage finances and personal relationships. It is a great idea to think it through and evaluate the pros and cons, or better, consult a finance professional at Mortgage Loan Ontario to help you make a well-informed decision. Below mentioned are the pros and cons of private mortgage:
Pros:
Applying for a private mortgage to buy a house can seem a very attractive proposition to home buyers because there are various pros to using this type of financing:
- Easy to qualify
Since lenders have their own rules and guidelines, they will even lend to borrowers with poor credit scores or may ask for a smaller down payment. However, if the borrower is taking out a private mortgage because of the above-mentioned reason, they may not be in a decent financial position to buy a home or take on any more debt.
If you are looking to invest in unconventional real estate, a private lender will also provide funding for that. However, you must be wary of certain issues such as the flip not going as planned, or it is less profitable than you initially thought.
- Quick approval process
Since it is easy to qualify for a private mortgage with a plethora of lenders, you may get close to the deal faster and there will be lesser hurdles to overcome. You don’t even need to provide a lot of documentation. But keep in mind, property appraisals and inspections are crucial to making sure the house is a good investment and in good condition.
- Flexible
With a private mortgage, you can negotiate better rates and terms. Additionally, you can even include a flexible repayment plan, waive certain fees, or lower your interest rates.
Cons
Some homeowners have concluded that they’d be better off taking out a traditional mortgage because below mentioned are some of the disadvantages associated with using a private mortgage:
- Lesser protections
There are certain loan qualifications in place to protect the borrower and make sure they have enough financial capability to handle debt and other loan obligations. This is the very reason that traditional mortgage lenders require the borrower’s credit scores and proof of income, including the maximum debt-to-income ratio.
- Shorter loan period
Private mortgage are usually paid off way more quickly than traditional mortgages. With a lower repayment period, your monthly payments will be higher, which can be difficult for a few borrowers to keep up with.
Most private lenders structure their loans as balloon mortgages, where initially the payments are low, but there is a large lump sum payment in the middle or at the end of the loan term. If you don’t have sufficient funds to refinance the loan, you can potentially lose your house.
- A chance of damaging personal relationships
It is important to keep in mind that a mortgage is simply a business transaction. Whether you are aware of the person or not, once you accept a loan from a friend or family member, they also become your lender.
If you happen to fall behind on your payments or are not happy with the way the loan is being managed, the relationship could turn toxic quickly. In some cases, the situation could even see you in a legal battle where either your friend or family member is seizing your property.
If you are still unsure of a private mortgage, you might be able to find a decent option from a lender with the help of the best private mortgage lender in Ontario – Mortgage Loan Ontario. Talk to our team today for more information.
How to Find A Reliable Private Mortgage Lender?
In addition to taking out a loan from family and friends, you can seek financial assistance from an industry professional like Mortgage Loan Ontario. We will do all the heavy lifting and shop lenders that provide favourable rates and terms. Even if your credit score is not the best, we can help and secure the mortgage based on your needs and financial situation. We are the private mortgage lender in Ontario you can place your trust. Get in touch with our team today to apply for one.
Reputable Private Mortgage Loan Lender in Ontario
There are plenty of private mortgage lenders across the country. Most of them have various guidelines, rates and features. It is imperative to work with an experienced professional like Mortgage Loan Ontario to help guide you through the process, including shopping around on your behalf to find the best mortgage product based on your unique situation.
A private mortgage lender provides financing for buying property. The funds come either from a company or an individual, unlike a conventional mortgage lender. As mentioned earlier, these loans are provided by a family member or friend, or anyone who has a personal relationship with the borrower.
They usually create their own guidelines and loan terms making it easier for the borrower to qualify. This is a fantastic option if you fail to qualify for a conventional mortgage. However, there are several personal and financial risks for both the lender and the borrower. It is imperative to consider the advantages and disadvantages or consult with our expert team before deciding to apply for a private loan to ensure it is the right option for you.
If you are looking to buy your dream home and are facing financial troubles, give our team a call today to help secure a private mortgage.
Schedule an appointment with our team today to find out more details about private mortgage.