Private Mortgages for Vaughan Homeowners
There are many reasons why a
homeowner in Vaughan might want to obtain a private mortgage. Banks are
notoriously regulated, and new, more stringent guidelines for lending continue
to be imposed on a regular basis. This means that homeowners who want to access
funds based on home equity often have their applications refused by traditional
lenders. Of course, financial struggles in the past, such as bankruptcy filings
or a history including debt consolidation can work against prospective
borrowers. But new regulations involving tighter restrictions on self-employed
clients mean that even more people are ineligible for conventional bank
products. If you own property in Vaughan and have been turned down by your
bank, consider a private mortgage.
There are two entities involved
in the process of securing a private mortgage: the licensed private mortgage
broker and the lender.
Private Mortgage Brokers
To become a private mortgage
broker, one needs to undergo training, write exams and participate in an
apprenticeship. Most times you can have an initial consultation with a private
mortgage broker for free, but if you continue to work with him/her, you usually
have to pay a fee. These professionals are knowledgeable about your options and
have strong relationships with private lenders.
When you’re choosing a broker, do
your research. Ask friends and family for recommendations or see if your bank
can refer you to a private mortgage broker. Use online resources to ensure that
brokers are members of professional associations. Meet
with prospective brokers to see if you
communicate well and if you feel like a productive relationship can be formed.
The right broker will match your needs to the right lender – which can lead to
a win-win situation for everyone!
Private lenders are funded by individual investors or
groups of investors. Some larger lenders have several different funding sources
or include a pool of mortgages called a MIC (mortgage investment corporation), while smaller
investors might simply lend out their own money.
These lenders tend to put emphasis on the property and the amount of equity
that a borrower has in the home. Rather than scrutinizing the borrower’s
history and financial situation, the private lender will often ask for a home
inspection and appraisal to be done. The primary concern for the private lender
is usually the condition of the property, the location of the property and how
easy it will be to sell if the borrower defaults. Private lenders are usually
willing to assume more risk than financial institutions.
Of course, assuming more risk means that private
lenders usually ask for a higher interest rate. Make sure that you are familiar
with current interest rates before signing any documents. You may find that the
rate requested is only slightly higher – or even lower – than comparable bank
There can be other costs associated with private
lenders, including: lender fees, mortgage broker fees, legal fees and the cost
of an appraisal if a recent one isn’t available.
A private mortgage is usually a short-term
arrangement, most often one to two years. It’s intended to be a bridge to more
Contact a broker today and find out more about how a
private mortgage can secure you the funds you need.