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When you should consider a private lender to finance you Barrie property
You should consider using a private lender in the following circumstances
- Where your debt to income ratio is high
- If your credit score is preventing you from getting a mortgage from a traditional lender
- If you have recently been insolvent
- When you have insufficient funds for a down payment on the property
- If you earn income from a non-traditional source
- If you want to obtain a second mortgage
- If the property that you wish to purchase is not one that the banks would finance
- You need fast finance and don’t want to wait for a long approval process.
Not everyone will qualify for a mortgage through traditional lenders. Institutional lenders are governed by strict lending regulations. Private mortgages are short-term, interest-only loans and they offer the borrower an opportunity to finance property over the short term while finding alternative ways to borrow money.
Private mortgage lenders are a great option for those who want a personalized experience, and who want to avoid the extended lead times and red tape required by institutional lenders. Private lenders are usually happy to finance property by up to 85%. Their primary concern is the value of the property rather than the history of the borrower.
- Property value – the property must be in good condition. It will be appraised. This is the most important aspect for the private lender as the property is the collateral for the loan.
- Income – the lender will want to know that you can pay back the loan.
- Down payment – the minimum loan to value ratio is 85% so the minimum down payment that you will have to make is 15%. The larger the down payment that you make the better from a risk perspective.
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Interest rates are higher on private mortgages
Private mortgages in Barrie are more expensive than traditional mortgages and depending on the risk the additional cost can range from 2% over the bank rate to upward of 20%. The interest rate that you pay will be determined by the loan to value rate, the location of the property and the overall perceived risk.
There are also fixed costs involved with private mortgages. These include appraisal costs, legal fees and broker fees. In some cases, the costs can be included in the mortgage.
Applying for a mortgage through a private lender is quick and easy. You will receive personal service and the loan provider will get to know you and your requirements. Mortgages with private lenders typically last just a year or two so you must have an exit strategy, a plan to settle and move to cheaper more traditional lenders within the time period. Your private lender will help you to find a traditional lender.
Certified Mortgage Brokers Barrie can match you with a private lender that best suits your requirements as we have with a large number of lenders with different areas of expertise on our books.
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