When to Consider a Private Mortgage?
Ever since the federal government introduced the mortgage stress test, more and more Canadians have been turning to private lenders in order to secure a mortgage. While private mortgages typically carry higher interest rates than mortgages from Canada’s chartered banks, they do serve an important purpose in the economy. Many private lenders realize that the lending criteria of traditional lenders is often too strict and that they often fail to consider the larger picture. In short, private mortgages help people become homeowners when other options are closed to them.
Reasons to apply for a private mortgage.
There are several circumstances under which someone might apply for a private mortgage including:
- Unconventional property – if you wish to purchase an unconventional property – such as a tiny home – there is a good chance that your bank will refuse to finance it. In this case, a private lender may be your best bet.
- You don’t want to go through a long approval process – if you wish to get financing quickly, you might consider choosing a private mortgage. Private lenders will typically make their decisions within a week.
- You have poor credit – For traditional lenders, one of the most important criteria that they will look at is your credit score. Private lenders on the other hand will look at the bigger picture, including your ability to make your payments and the value of the home that you are purchasing.
- You only need a short term loan – Most mortgages in Canada are for a term of five years, but private mortgages are typically much shorter than that – 1-3 years. It maybe that you only need a loan for a year or so while you work on building up your credit. Or maybe you are planning to sell within two years. If you don’t want to have to go through the hassle of breaking your mortgage early, then choosing a private mortgage with a shorter term can be a good option.
- It’s hard for you to prove your income – If you are self-employed or you have recently moved to Canada, then you may have a hard time getting the necessary documentation to prove your income. If this is the case, a traditional lender may be unwilling to grant you a mortgage. Fortunately, there are private lenders that specialize in practically every area, including in mortgages for those who have difficulty confirming their income.
If you are interested in learning whether a private mortgage might be right for you, contact 1ONEFUND Financial today.