A significant number of Canadians are borrowing from private lenders to purchase homes because not everyone can get mortgages from Canada’s lending institutions and big banks.
The Dream of Home Ownership
The above is the reality of the housing situation these days as traditional lenders get stricter in their lending practices because of the rising real estate prices and low interest rates. After all, they are also businesses that have to weigh factors and lending in present time can be quite risky.
The situation is made worse by the fact that down payments have also risen, with homes costing a minimum of half a million needing a down payment of at least 10% of the home’s value. That kind of money is not something that everyone can produce out of pocket; hence, most Canadians will have to resort to loans to make their dreams of home ownership come true.
Light at the End of the Tunnel
Private mortgage lenders are a blessing to many Canadians because they allow those who need funds to borrow via a private mortgage. A private mortgage is not the same as borrowing from a trust or bank as the funds come from a private individual or a business.
The business of private lending accounts for about 4% to 5% of the mortgage market in Canada. While this figure is still small, this is a huge leap considering that private mortgages used to be less than 1% of all mortgages during the recession of 2008 and 2009.
With the above said, it is hard to deny that private lenders play a significant part in Canada’s real estate landscape, more so that those who are self-employed (15% of Canada’s workforce), turn to them because they can’t get a traditional mortgage without third-party income validation.
Private mortgage lenders are also a top option for first-time homebuyers who have bad credit, have an illness, have lots of debts, have just divorced, have lost a job, is a non-resident, or owe back taxes. These people are potential homeowners who happen to not have a good income record or do not possess as big enough take home salary such as in the case of small business owners who have just started their companies.
It should be noted that borrowing from a private mortgage lender means paying higher interest than what a traditional lender charges. With this mentioned, private lenders also help borrowers repair and rebuild their credit ratings so that they can get better rates with other lenders in the future.
Benefits of a Private Mortgage
There are many ways to determine whether a private mortgage is right for you but the best way in our opinion is to weigh the benefits of a private mortgage that you can avail of. They are as follows:
- There is less red tape
- Enjoy mortgage flexibility
- Higher lending risk tolerance
- Good rates.
- Real time lending speed
- Real-world purchasing advice from the lender
- Easy pre-approval of mortgage
Need help getting a private mortgage? Contact us at Mortgage Central Nationwide. Our professional mortgage brokers will help you get in touch with a private lender and help you with your private mortgage application.