Is a private mortgage a good idea?
A private mortgage is suitable for those who do not qualify through the traditional Canadian banking system. Perhaps income can’t be shown, or credit is in bad shape. Instead, private mortgage lenders tend to focus on the equity available in the property and how the mortgage will eventually be repaid.
How do private mortgages work in Ontario?
Private mortgages in Ontario are offered by literally over 1000 different lenders. These lenders offer different rates and terms and have different tolerances and measures for risk. However, the one common thing among these lenders is that there is far less paperwork and hoops to jump through.
How fast can I get a private mortgage?
Many private mortgage lenders advertise ‘1 day financing’. However, this uually isn’t possible. A more reasonable expectation would be from application to closing within 3 days. Sometimes, 2 days is possible, but if private mortgage funds are required fast, then 3 days is a good expectation.
One reason for this is lenders will usually require an appraisal that can take until the next day, even on a rush basis. The lawyer funding the deal will also need a few hours to prepare the transaction. Altogether 2-3 days is typically a minimum.
How do I get approved for a Private mortgage?
In most cases, as long as there is at least 15% for down payment or 15% equity remaining for a refinance, a private mortgage can be approved. However, in 2023, in some cases, for example, with no income and distressed credit, the minimum approval can require 20%.
Often, getting approved is not the difficult part. It’s about getting approved for the best deal with the best mortgage rate.
The rate offered will depend on the ability to repay the mortgage and credit. For example, if there is a temporary layoff for a skilled trade, the likelihood of repayment is high once the borrower returns to work.