Private Mortgage

What is a Private Mortgage ?

A mortgage that is not provided by an institution or traditional lender (such as a bank or trust company), usually another individual or business.
Conventional lenders and banks apply lending guidelines that exclude many borrowers who are able to repay loans. Unlike traditional mortgages from banks, a private mortgage offers more freedom and flexibility and there are times when a private mortgage may be the only option left after a bank rejects your application.

How we can help

You may need to borrow money for a variety of reasons such as debt consolidation, business Improvement, Home Renovation, Tax Debt, Car Loans, Temporary Needs, and Personal Loans
There are many reasons you would use a private mortgage lender:
A prime lender or bank may not be able to finance your purchase of an unconventional property.
Your bad credit history prevents you from getting a loan from a conventional lender.
Fast approval - a long approval process doesn't suit your needs, and you need fast funding.
Short-term loans are what you need.
You are unable to obtain a traditional mortgage because of your non-confirmable income. (If you are self-employed, it can be difficult to get the right paperwork in place).

There are several examples where private mortgages may be necessary as you will see below:

Private mortgage loans

Private mortgages are short- term, interest-only loans, ranging in length from 3 months to 2 years. Interest only loans. In comparison to conventional mortgage lenders, private mortgage lenders offer the highest rates and should be used as a last resort after being turned down by banks and alternative lenders. Borrowers are expected to be able to transfer their mortgage within a year to 18 months to a conventional lender (A or B).

The Mortgage Process

Standard Operating Procedure

Getting your mortgage funded:

1. Introduction – A discussion with your Mortgage Broker

- Information gathering, including:

- Annual income; full-time employment or self-employed

- Your down payment

- Your credit history and verification of potential issues

- Your purchase price or the refinance property value

- The mortgage amount you are seeking

2. Mortgage Application – An online fillable Form
– Applicant to input required information:
— Include all applicants and guarantors (if applicable)
— Include all your sources of income
— Include all of assets and liabilities (example; automobile, credit card, etc.)
— Documents and collectors

– If it’s a purchase: The Agreement of Purchase and Sale and MLS information
– If it’s a refinance: mortgage statement and property tax
– Income documents: The last 2 years of NOA and T1 General
— For full-time employment: Job letter and pay stubs and the last T4
— For self-employed: 12 months of bank statements, business registration (preferable if over 2 years) GST/HST number, and invoices you invoiced clients
– If you are selling another property, we would need the Agreement of Purchase and Sale and MLS of the other property, and the mortgage statement
– For a rental property: disclosure of rental income
– If you have multiple properties, for each property we would be need the following:
The value, the mortgage balance, the mortgage monthly payment, the condo fee (if applicable), the property tax, and rental income if applicable.

1. Submission of Application
– Submit the application to prospective lenders
– Negotiate the best rate, terms and conditions that are suitable for the client
– Receive a conditional commitment from a lender, with the terms and conditions that best meet the clients’ needs
– Present the commitments to the client for approval

2. Client Approval
– Obtain necessary client signatures

3. Condition Fulfillment
– Fulfill the conditions in the commitment, by providing additional documents and conditions.
– Order the property appraisal,
– Lender to verify employment and verify all the conditions are met

4. Closing
– Lender to notify brokers when all conditions are met.
– “broker complete” indicates we are ready for the closing.
– Sign the closing documents.

5. Funding
– The date your lawyer gets the funds from the lender

6. Compliance

What to Remember:

  1. Often, the lender will verify employment before closing, to make sure the client is still employed by the company
  2. A conditional commitment does not mean the deal is final, in most cases, only after the borrower signs the commitment, the lender will send all the documents we submitted for review. 
  3. Most lenders require the borrower to pay for an appraisal.
  4. On the A side (lenders that lend with a low rate to borrowers with good credit and income), the borrower does not pay a lender fee, or a broker fee. 
  5. On the B side, the borrower does pay in most cases, a lender fee of 1% and a broker fee as well.  
  6. The process to get a conditional commitment takes approximately 2-5 business days from the day we get a full application with all necessary supporting documents.  This is an estimate. Insufficient information and documentation may increase timelines.

A conditional commitment is not an indication that the deal is final, and a client should not waive the condition of finance. A client is recommended to waive the condition of finance only after we fulfill all the conditions on the commitment

What is the difference between A lenders to B lenders?

With the increasing qualification required for an applicant to go through to secure a mortgage, certain difficulties have arisen and so to adjust with these changes new types of lenders have also risen. They can be grouped into different categories:

A lenders:  Traditional lenders, such as banks and credit unions. To qualify for these lenders, applicants must possess high credit scores and a stable income. These applicants will have to undergo a stress test to check whether they can still pay their mortgage if rates go up.

B lenders: For the other part of the population who do not fall under the “A” qualification can secure a mortgage through B lenders. B lenders offer a mortgage to those with weaker credit scores and so are subjected to higher interest rates than “A” customers. And so they are of two types:

Monoline Lenders: These offer a 1%-2% higher interest rate than the traditional lenders. They would assess you according to your credit score but are lenient.

Private Lenders: These lenders are unregulated and take into account your current home equity and would not be looking into your credit or history. They do have higher interest rates than the ones mentioned above.

**Always consult a mortgage advisor to assess the loans offered by private lenders.