Last Updated on: July 2020

Private Lender Toronto

As real estate demand becomes higher and higher in Canada, the largest cities in this country are experiencing astronomical rises in prices. As Toronto is the city with the largest population, this pertains to this maple leaf city as well. Let’s take a look at some mortgage lending options from private lenders and why they are a good alternative.

Why is Private Lending an Option?

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While banks are still giving out loans and mortgages, people are shifting towards private lending. This is in part due to the crack downs the government has placed on banks and other financial institutions. 

 

This is what results in the high interest rates and issues with payback. If you find yourself struggling with coming to terms with private lending, a bad credit score, or other personal issues, a private lender may be the solution for you.

Why is Private Lending a Smart Alternative?

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Since houses and condos in popular cities in Canada can cost upwards of five hundred thousand to over a million, not everyone has the down payment saved up, especially during financial crises. You’ll also have broken relationships that can result in one partner wanting to buy out the other.

As mentioned, Toronto is the largest and most populated city in all of Canada, and the demand for real estate is also one of the highest. Let’s look at some benefits of opting for a private lender.

1

Bad Credit

If you are laden with bad credit, there is a very low chance a bank will approve your mortgage loan. This is standard, and not something you can fault the bank on. Private mortgages are more negotiable and a mortgage broker will also be more lenient with your shortcomings.

 

Even with bad credit, a private mortgage can still be within your grasp. All you need to do is to convince your private mortgage lender that you are able to pay back your private loan. 

 

A good way to do this is with a plan. Do your homework and put some effort into research to come up with a feasible plan for the private loans. There are people who have failed to obtain mortgage loans from a bank and succeeded with private mortgage lenders.

2

Lower Bar for Qualification

As we have touched upon above, the qualifications to secure a private loan from private lenders is much higher as their requirements are lower.

 

What a private lender usually looks at is the value of the property and how the value can be increased by renovations, flipping, etc. Their job isn’t to look into your past as much as a bank would.

3

You Can Receive More

Private lenders generally don’t require you to pay a deposit up front. It is suggested that with properties, banks will prefer you to put down up to 20% of the asking price. That’s a hefty amount for most middle class workers.

 

A private lender has the option and the ability to loan you 100% of the money you need for your next purchase and without a down payment. All you need to do is adhere to the rules and pay off the monthly fee plus interest until your payment is fulfilled.

4

It’s Faster and Easier

A private lender in Toronto and other parts of Canada differs from traditional banks because the application process is much speedier and easier. In order for your lender at the bank to dole out your loan, they must first take a look at your credit, and fill out forms with precise and accurate information that can be very time consuming.

 

One thing private lenders do not need to deal with are annoying regulations and stringent rules. This allows the application process for your mortgage to go much faster and smoother.

 

With private lenders, you won’t need to prepare mounds of paperwork for the lender to pour over for hours then make you wait for days to approve your loan. 

 

You may have special personal circumstances (such as being an entrepreneur) that deter traditional banks in Toronto from even considering you. You may even have problems with your mortgage being renewed. However, with a private lender, this is less of an issue. You are given a fair shake regardless of your credit, employment history, and background.

Who Should Go for a Private Mortgage Lender in Toronto?

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Now that you know the advantages of opting for this alternative mortgage option, let’s take a look at who would benefit the most from private lenders?

1

Beginner Buyers or First Time Borrowers

It’s difficult to get started and since we’ve seen our fair share of global financial crises in this century, not many of us have a few hundred thousand dollars lying around. 

 

Banks don’t see this as a good thing which makes it even harder for first time buyers to acquire a mortgage. Even if they do manage to secure it, the interest rates might be through the roof.

 

Private lenders give these first-timers a fair chance at making important financial investments and purchases that can help build their credit up in the future. Once a beginner has established a strong relationship with a private mortgage lender, they will be able to move onto other sorts of investments later on.

2

Fixer-Upper Houses

Private lending is a great option for people who purchase fixer-upper houses. Fixer-uppers are what we refer to as houses that need to undergo extensive renovations. These houses may even be unlivable to begin with before this process.

 

Banks don’t usually jump at the chance to hand out a loan to these types of properties, but private mortgage lenders think oppositely. As we also mentioned before, private mortgage lenders focus more on the property and potential value than your paperwork and background.

 

If they see a good chance that your fixer-upper could double or even triple in value, they won’t hesitate to give you the private mortgages.

3

Are You Looking to Flip the Property?

On the other side of the coin you have people who are looking to flip the property. Individuals intending to flip property do not view the house they are buying as a home, but rather an investment. 

 

Some may fix it up in the process, others buy it for a low price and resell it for much higher. This was much more popular and prevalent in Canada in the 90’s and early 2000’s.  

 

Since this practice is risky for banks (factors such as whether or not the property will sell in a short time or at a much higher price come into consideration), a private lending institution may see it as a great investment as well.

 

If you are thinking about flipping property, private mortgage lenders may be the best and sometimes only option.

5

For Emergencies

Perhaps you have had a mortgage loan from the bank and unforeseeable issues prevent you from being able to make the mortgage payments consistently. In this case, you can turn to a private lender to help fund the rest of your mortgage first.

 

This could pertain to people who have bought a house before their previous home has sold as well. There are people who may have found themselves with a demand letter. Unexpected issues can always arise, and knowing that you can turn to a private lender for mortgage problems is comforting.

 

6

Those Who Own Laneway Houses or Tiny Homes

To combat the rising property prices due to foreign investment and other factors, many major cities have given the greenlight to building laneway houses. Since small homes are part of the main property, they cannot be refinanced themselves.

 

For those who have taken out second mortgages won’t be able to keep pulling money out of the value of the property. For these people, these mortgage lenders are the way to go.

 

Risks of Private Mortgage Lenders

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One big risk is they charge a higher interest rate and fees than banks. They also yank the rug out from under you much faster than a bank would. Meaning they repossess much faster. 

 

However, due to the high demand and large number of people flocking towards such mortgage institutions, the competition is high and the rates are dropping slightly.

Conclusion

It’s nice to know that there is a plan B if banks turn you down for a mortgage loan. It gives those with black marks on their record a second chance at reestablishing themselves.

 

 If you have stellar record but don’t have the paperwork to prove it (the self-employed or freelancers), these lending institutions offer you a fighting chance. Canada’s stricter mortgage regulations are beginning to make these lenders a much more inviting option.

 

Received a Statement of Claim on your mortgage? Find out what you should do when a lender makes claims over your property here.

 

I'm Foster M, and I am here to share the right information that will get you out of legal issues. Unlike many, I know what it feels like almost to lose everything. I have been there. Luckily, I got help and advice from the right people that helped me a lot in getting my life back on track. Today, I aim at ensuring that as much as possible, I should help others in getting their lives back! I hope this article helped someone. I will keep it coming :)

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