What is a private mortgage lender?
Private mortgage lending is an alternative to regular bank financing, it is used in specific circumstances where a mortgage applicant does not fit in a standard banks boxy rules. Private mortgages are much easier to get approved for as most of the approval criteria is based on equity. For the most part, if you have equity in your home you will get approved for a private mortgage.
What are private lender for?
Private lenders are for people who either have a large downpayment or have a lot of equity in their home. It can help in situations where a bank refuses to grant a mortgage or during and prior to the foreclosure process. Private lenders also can assist builders and home flippers achieve their financing goals fast and easy.
Who are private lenders?
They are companies that have investors looking for a good return on their dollar. They will finance a property at a certain interest rate and will pay their investors a split of profits from the mortgage financing. For example. An investor is looking for a 5% guaranteed return. The private lender may charge a buyer or a person refinancing their home 7%. The company will earn 2% of the profit. They basically use other peoples money and guarantee a return to their investor.
High risk mortgage lending
Private mortgage lending is considered high risk financing. Most of the time the people who use private lenders will be in a specific scenario that will not allow them to get standard bank financing. Therefor most of the time it is considered a high risk loan. There are many names for private lending and high risk is one of them.
How does private lending work?
Private lending work very much how bank lending works. The lender will get an appraisal done on a property (usually at the cost of the buyer/refinancier). After value is assessed they will lend normally up to 80% of the property value. Some private lenders will only lend up to 75% of the property value. Please call me anytime to find out what value they will lend up to. The buyer or person refinancing will have to pay a lawyer to facilitate removing the old lender from a transaction and adding the private lender to title. A private loan can close very fast in as little as a few days.
Private lenders in Alberta
There are many private lenders that serve the Alberta marketplace. In Edmonton and Calgary alone there are over 30 private lenders. At lendramp we have access to all of these lenders and more right across the country. So we serve every province. It is important to contact us before you sign up for a private mortgage so that we can shop the market for you. The rates with different private lender can fluctuate massively depending on the investors. We make sure our clients are getting the best rates they can get for their circumstance.
What is a B lender?
A B lender is different from a private lender. The rates you can get out of a B lender are in between bank rates and private rates. Many people who search for a private lender can fit into the B lending category, but unfortunately many of them never find out about this option. We shop the entire mortgage market to get the lowest rates for our clients. We have had clients that had private mortgages prior to meeting us with interest rates as high as 20% for a mortgage. After meeting with them and understanding their scenario, we were able to get them into a B mortgage for as low as 2.89%!
It is so important to talk to a professional that knows about this type of lending before signing anything. If you go direct to a private lender, you may end up paying way more than you need to.
How do I get a private mortgage?
You can get a private mortgage by applying on this website here. We take a full credit application from you and assess the circumstances. After that we will collect some documentation including mortgage statements, offers and income verification. Based on this We will tell you how much you will qualify for. If you are doing a debt consolidation we will be able to pay out your debt directly to the creditor. A private mortgage can close as fast as you can provide this documentation!
How much do I have to put as the downpayment for a private mortgage?
The minimum you can get a private mortgage for is 15% down. This minimum downpayment can change based on municipality and property type. For example if you are buying an apartment style condo, the minimum downpayment for this type of property is 20%
Can a private mortgage help me get out of foreclosure?
Yes a private mortgage can absolutely help many people get out of foreclosure. I have seen many situations where a bank has refused to continue to finance a property and have started the foreclosure process. If a home owner allows this to go further without making payments or refinancing the bank will take their home. It is best to get a private mortgage or a B mortgage before this happens. The private lender will pay out the existing mortgage and start a new mortgage. At this point the old lender will be satisfied and you can move on. Ultimately the goal should be to get back to a standard lender when your credit or situation approves. I recommend using the private lender to a max of 2 years. One big benefit is you can get lower payments by doing interest only payments through the private lender.
What is the interest rate with private lenders?
The interest rates from private lenders are as low as 3.5% all the the way up to 15% depending on the unique scenario. For most transactions the rate is around 4.5% with lender fees around the 2% mark. Let us help you find the best rates in Canada! The lenders will send out promotions when they have excess funds. We are updated daily on their rate promotions as they do not usually advertise these to the general public.
Can I get a mortgage if I have bad credit?
Yes you can get a mortgage if you have bad credit. That is what the private lending platform is all about. They do not care how bad your credit is. All they care about is the resell ability of the property and if there is enough equity to cover all losses if you were to default. I have had situations where a person had no job and no credit. This particular client inherited a huge downpayment and the property costed more than they had cash. We helped them get a private mortgage at 4% and they were able to purchase their dream home!
Will a private lender give me a mortgage if I am self employed?
Yes some private lenders love to work with self employed people. They generally need you to be employed for a minimum of 3 months and will ask for bank statements showing income as well as previous job history. If your business has only been open for a few months, they will look at previous history of a similar job experience.
Best rates for a private lender.
There is one sure way to get the best rates through a private lender. And that is to call us and have us negotiate on your behalf. Many private lenders will give us a larger discount than they would give you because of the volume of business our company sends to them. The savings can be significant. The rates from the private lenders change every few weeks, so I will not quote a set rate here. However at this time the rates with the private lenders are around 3.99%
What are the terms for private lending?
Each private lender has its own preference on the term of the mortgage. Most people choose to do a 6 month to 2 year term with the private lenders.
In a standard private lender contract, there are several terms and conditions that are generally hidden in the small print. Some of these term and conditions can include automatically charged renewal fees and paperwork fees etc. Always speak to one of our brokers about this. We are knowledgeable and will help you understand exactly the type of contract you are signing.
Honestly you really have to be careful about this as there are some private lenders that are not regulated. I have seen some of them charge ridiculous fees for their loans and huge penalties. Almost to the point it is criminal.
Can I pay CRA debt with a private mortgage?
Yes CRA debts can be paid using funds from a private mortgage. Many people, especially self employed people find themselves in a position where they owe the government a significant amount of money in personal and business taxes. The interest rate for this type of debt is high, so it is worth it to pay it off using a mortgage. There are several options for this. Option 1 is to get a second mortgage behind your current mortgage if you have enough equity. Option 2 is a home equity line of credit (low rate) and option 3 is re-doing the entire mortgage and increasing to pay off the debt.
On the close date of the loan the lawyers will pay the government directly for you!
Do private lenders do lines of credit?
No private lenders do not do lines of credit directly. They will give you cash in had at a specific interest rate. Their fallback/security is the equity in the property and the properties re-sellability.
If you are taking out the private mortgage for a specific reason like renovation. It is a good idea to know closely how much you need. This will prevent you from getting too large of a mortgage from the private lender.
Can I get a mortgage with no payments?
Yes, this is a trick I have used to help a lot of people in bad financial situation. This is sometimes called a reverse mortgage. Basically this is used when a client cannot afford to make their mortgage payments due to sickness, injury or job loss. Upfront I will build in 1 yr or more worth of payments so that they will not have to make mortgage payments and they can concentrate in getting in a better financial state. You would never want to continue to do this long term as it would eat all of the equity in your home over time.
A lot of private lenders like doing this because it guarantees that they are paid and by the end of it the clients credit and job status is usually much better allowing for them to get a mortgage with an A lender. If this is something you are interested in please call us so we can help navigate this for you.
How long does it take to get a private mortgage?
I can help you get a private mortgage approved in a day, after this the private lender will instruct your lawyer which takes around another day and the lawyers will draft their paperwork for you to sign. If you want to get this closed fast let me know as the lawyers can slow things down. Our team can call around to law offices for you so that we can get a lawyer who has the time to do this fast. So to fully answer the question the norm is between 1 and 2 weeks before you will get your money in hand.
Is private lending the same as equity lending?
Yes private lending is the same as equity lending. The private lender will not work with you unless you either have equity greater than 20% of the value of your property or a downpayment equal or greater than 20% of the equity in your property.
Where can I get a private mortgage?
You can get a private mortgage anywhere in Canada through our team. You can apply now and we will contact you to discuss the details of the private mortgage. There are many private lenders out there and in Edmonton and Calgary alone there are over 20 private lenders servicing these markets.
Bankruptcy and private lenders
Many people do not know that getting a private loan can help you in your bankruptcy proceeding. Even if your credit is bad, these lenders would be will willing to help you pay off debt using equity in your home! Most recently we had a client that was declaring bankruptcy due to a bad divorce and job loss. We were able to get them 1 yr of no payments on their mortgage and paid off 2 of their credit cards using equity in their home. This allowed them to avoid the bankruptcy completely and consolidate their debt. Now these clients are in the position to start saving again and act stress free in their job search. Overall it is all about getting in a better financial position to move forward.
Will a private lender give me a mortgage if I don’t live in Canada?
Yes many private lenders will loan money even if you are not a citizen or a permanent resident. Even if they are not planning on living in Canada the private lender only really care about the equity or downpayment in the property! This opens the doors for overseas investors with no credit to get loans in Canada. The interest rate may be higher, but they will get approved!
Will private lenders do bridge financing?
Yes private lenders will do bridge financing at a cost to the borrower. We try to avoid this as much as we can, because it is not cheap. But if you do need this it is absolutely an option for you.
Can a private lender help me pay off debt?
Yes the private mortgage lenders will pay your debt off directly out of mortgage proceeds if you like. Many of them will ask that all CRA debts be paid out with the loan and the lawyer will forward the funds to the debtor.
Low fee Private mortgages
There are private lenders out there that offer low fee loans or no fee loans. In this case the fees are generally just built into the interest rate. So either way you will be paying a fee in one way or another.
What provinces can I get a private mortgage in?
You can get a private mortgage almost anywhere in Canada. We can service all provinces. There are stipulations on this like some private lenders will only lend up to a certain value in certain municipalities or some may not lend on a certain type of property.
Do I need an appraisal if I do a private mortgage?
Yes all private mortgages will require an appraisal. They want to ensure that the property is worth the value we are giving them. Most private lenders will have a list of approved appraisers. We do have a few private lenders that will pay for the appraisal themselves and you can build the cost of this into the mortgage if you like.
No payment mortgage solutions
One of my favourite strategies is to get a no payment for a year mortgage for my clients when they are in a bad financial position. This helps them to live stress free using the equity in their homes for a period of time. Using this strategy, your mortgage payments are simply built into the loan.
What types of properties do private lenders finance?
Private lenders prefer to finance single family homes in major municipalities. You can get a loan with as little as 15% down for this type of property. They will also lend on condos and townhouses with 25% down. Most private lenders avoid mobile homes as there is way less security for them with these types of properties. Private lenders do not lend on farms ad usually limit the lending amount on acreage type properties.
Private lenders for home builders.
We have access to a few private lenders that like to work with home builders. They will lend money in phases as a property is being completed. Normally the land will be purchased cash from the builder or developer. The private lender will lend on phase one (digging, permits and foundation). Then again on phase 2 (framing, electric and plumbing rough ins). Phase 3 for closeup (insulation, exterior finishing, windows etc). And then on the final stage (finishing).
Obviously the interest rates through a private lender is a little higher than a bank so you will want to factor these rates into your overall cost spreadsheet.
Private mortgages for house flippers
We have an amazing relationship with some lenders that like to do mortgages for house flippers. They will lend on these house flips with the clients putting as little as 10k down! These lender specialize in house flipping and will assess a property value before and after renovation. They will also estimate the renovation cost to ensure you will be profitable. They want you to be profitable so that you will continue to flip homes. I have clients that have used these lenders and have grown their businesses by over 1000%. One client in particular went from earning $0 to 300k per year in 3 years!
Are private mortgages safe?
Private mortgages are registered on your title. As long as you are making your payments they are very safe. If you do not make your payments they will have the authority to foreclose on you just like a regular bank. Yes private mortgages are safe as long as you follow the rules.
What should I do if a bank will not renew my mortgage?
At lend ramp we have a process for when the bank will not renew your mortgage. Step one is doing a credit application with us. First we will try to place your mortgage with an A lender, then if you cannot get approved for one reason or the other through a regular lender we will explore the B market for you. If you still cannot get approved we will send your application to the private market where anyone can get approved if they have enough equity. This is a great short term option while you get your finances in order.
Divorce and private mortgages
Many people will have to pay out a spouse in a divorce situation. Private lenders can get you your money fast. They will work with your lawyer to ensure everything is paid out using your equity that is included in the divorce or separation agreement.
Is it easy to get approved for a private mortgage?
Private mortgages are the easiest mortgages to get approved for. The decision is all based on equity and downpayment. If you have equity over 20% in a property, you will get approved!
Do I need a mortgage broker to get a private mortgage?
You should always use a mortgage broker like our team when you are getting a private mortgage, please call us anytime. We shop the market for you and ensure you are getting the lowest rates and the best terms on a loan.
What is a MIC?
A MIC is the name used for some private mortgage companies. It stands for mortgage investment corp. The pics are regulated. There are other private lenders that are fully private, in other word they are some guy lending money. Be careful for these people as they can be bottom dwellers and charge massive fees. I recently dealt with one company that took advantage of a handicapped woman. She was charged huge fees and an even larger payout. The interest rate being charged was criminal and we treated it as such. I contacted a lawyer to deal with this and we were able to help her take her interest rate from over 20% to 4%.
What is interest only payments?
Interest only payments is when you take out a mortgage and you want to keep the payments low for a short term period. You will be paying down interest only and none of the principle during this type of mortgage term.