Blog And Articles

Private Mortgage Lenders vs. Banks

Ajay Jain

14 Nov 2019 Private Mortgages

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What Is a private mortgage?

Private mortgages are loans provided by lenders outside of Canada’s traditional banks. Generally, private lenders are small companies or individuals who provide short-term, interest only mortgages to borrowers as an alternate to Canadian banks. As opposed to banks who look primarily at credit score, private lenders’ central focus is a property’s value, helping qualify many individuals the banks won’t.


Differences Between Private Lenders and Bank Mortgages

  • Private lenders do often come at a price. Interest rates can range from 4-18% plus potential fees.
  • Private mortgages are generally interest only. Unlike a traditional mortgage, you won’t be responsible to pay off the mortgage principal, which allows for lower monthly payments.
  • Private mortgages are considered short-term solutions in comparison to a traditional mortgage due to their higher interest rates.
  • Less documentation is required for a private mortgage. This helps borrowers obtain their financing much faster than they would from a bank. 
  • Private lenders have greater flexibility with your credit history since their primary interest is in your property value.  



Private Mortgages

Banks

Loan Term

Usually 1 Year

1 Year - 5 Year terms

Interest Rates

Starting at:

1st Mortgage - 3.89%

2nd Mortgage - 6.99%

Starting at:

1st Mortgage - 2.79%

2nd Mortgage - Prime

Monthly Payments

Interest Only

Principal + Interest

Documentation Requirement

Minimal – usually just a property appraisal

Significant + property appraisal

Credit Score

No Minimum

620+

Registering A Mortgage

Yes

Yes

How Much Can I Get as A Percentage of My Home Value (LTV)

Up to 90%

Based on the Stress Test:

- Max 80% on Refinancing

- 65-75% on HELOCS

How Quick Can I Get my Money?

As quick as 48 Hours

Typically, 1-2 Weeks



Should I Get a Private Mortgage or Bank Mortgage?

Private lending is an attractive financing route in several situations. Generally, if you have an existing relationship with a bank it’s worth exploring your options through them. If you find yourself in any of the following situations, private lending may be best for your personal circumstance.


  • Purchasing an unconventional property
  • Time-sensitive situations
  • You’ve been previously turned down by banks
  • You have a poor credit rating
  • Self-employed with unverifiable income
  • New to Canada with lack of history


About Rateco Private Mortgages

If you are ineligible for bank financing, Rateco is happy to help. We pride ourselves on our borrower-first mentality providing complete transparency and honestly throughout your Rateco experience.

The Rateco reverse-auction enables private lenders to bid against one another to service your private mortgage. Borrowers have total choice and control over who they chose to work with, forcing lenders to provide their most competitive interest rates to you to win your business. Best of all, there’s absolutely no cost to you, the borrower, until your private mortgage has been funded. We’re happy to work on your behalf, risk free.


Apply online today for your private mortgage!