09 Jul 2020 Private Mortgages
What Is a Private Mortgage?
In Toronto, traditional mortgage lenders including banks and credit unions generally reserve their products for clients with strong credit scores (620+) and considerable household incomes. Toronto’s private lenders offer an alternative mortgage solution for borrowers who don’t necessarily fit these qualification standards.
Private mortgages are generally provided by investment corporations or individuals unassociated with a traditional Canadian bank. Unlike conventional mortgages, private mortgages are provided as short-term, interest only products. With private mortgages, homeowners aren’t expected to pay off the mortgage principal, but rather make monthly interest payments.
In Toronto and across Canada, private lenders are not regulated by the Bank of Canada. This allows private lenders to set their own qualification standards and therefore focus on borrowers’ assets rather than an individual’s credit history or income.
Private lenders typically require similar borrower information as a bank, such as income documents and credit information, however, this is typically to determine a borrower’s mortgage rate rather than for qualifying purposes.
When to opt For a Private Mortgage?
Generally, private lending should be considered as a mortgage solution once you’ve been turned away by traditional Canadian banks. Due to the heightened level of risk in lending to borrowers who have deflated credit scores, interest rates are customarily higher with private lending. However, there are many reasons beyond a low credit score why a private mortgage may be an attractive alternative.
Private Mortgages in Toronto
Residents of Toronto and the GTA are at a distinct advantage in gaining financing through a private lender. Private lenders generally prefer lending in urban centres as properties tend to carry higher real estate value compared to those in rural or smaller Canadian cities and towns.
Furthermore, Toronto and the GTA have an abundance of private lenders in comparison to smaller Canadian municipalities. Not only does this provide borrowers various options and rates to compare, but private lenders are generally most comfortable investing in properties and areas they’re most familiar with.
Applying for a Private Mortgage in Toronto
Borrowers in Toronto and the GTA have an abundance of lending options when applying for a private mortgage. At Rateco, we provide an online application experience tailored to keep the financing process streamlined and straightforward.
Once your application is received, Rateco auctions off your mortgage to multiple private lenders within Toronto, enabling them to bid their best interest rates against one another. This ensures you receive the best rate for your private mortgage, while having the opportunity to compare and contrast various lenders services and offerings.