Private mortgages lenders in Ontario for the most part can be found through your local mortgage broker or from another person. Private mortgage lenders aren’t always a good or viable option but can be considered when your income is unverified and therefore banks are unwilling to finance a mortgage. Other scenarios in which a private mortgage lender might be the best choice is if you need quick funding, are only planning to have the loan out for a short time, you have your eye on an alternative property that a bank wouldn’t accept to finance, or if your credit is unacceptable to banks for financing. Since it is most likely you will be on a personal level with the lender, it is imperative to consider all aspects of borrowing money on your part and the other party lending money. If you have a relationship with the lender, you should consider how borrowed money will affect your relationship with them and especially consider the effects on the buyer if something was to go awry with the payments.
Seeking out private mortgage lenders can be difficult but it’s important to find a lender who has investment philosophies that match your needs, if you don’t know someone to ask. Some lenders prefer to invest in certain types of property mortgages like commercial mortgages or residential mortgages. The best way to find a private mortgage lender who would be willing to lend you money is through an established mortgage lender in the area the property you’re looking to finance. If the reason you’re unable to attain a mortgage through a bank is because of bad credit, private mortgage lenders are the best choice because they often look at requests for mortgages on a case-by-case basis and usually see the investment benefit over a bad credit rating.
Private mortgage agreements, whether signed with an unknown lender or a friend, need to be legally and properly documented. Every detail must be documented including aspects of payments, due dates and what the procedure is if payments are defaulted. Work with professional lawyers and accountants who know your case to construct these forms and stipulations that will secure the loan and ensure it is done correctly and legally.
Terms from private mortgage lenders are usually vastly different from banks and usually the interest is a little higher. Normally, private mortgage lenders can approve a loan in a matter of days and have funds in order in a matter of only weeks; loan processing fees are often applied to the loan also. The terms of these mortgages don’t span decades like bank given mortgages do, instead usually only lasting up to three years.
Private mortgage lenders are an attractive option to those that are looking to purchase a home but don’t have the funds or the appearance of funds to get a bank loan. A private mortgage is something that can be attained and signed fairly easily but the success of the loan may depend on the accuracy of loan agreements and statements written out.