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What are the advantages of a Private Mortgage?

Talking about Canada’s mortgage space, traditional banks still hold the maximum share. However, due to its stricter lending rules after the 2008 financial crisis, the sizeable market for private lenders is increased. As private lenders offer several benefits over traditional lending, more Canadians show interest in the private mortgage. With fewer rules and regulations, a range of attractive interests, and a streamlined documentation process, the private mortgage has become the first preference of many people. Let’s understand what private mortgage is and how it is benefiting Canadians?

What is a Private Mortgage? 

Any mortgage which is not from a Bank is known as a private mortgage. These loans are mainly for the people who want financial help for the short term for improving their credit or consolidate their debts. A private mortgage is given by private lenders who are not federally regulated. So, they are not bound by any restriction and thus provide you with various advantages over traditional lending. By taking help of private lenders, you can even buy hobby home, agricultural land, vacant land, or an agricultural land with home easily.

Merits of Private Mortgage are: 
  • Simple Qualification, Quick and Easy Application Process
It’s easy to qualify for a private mortgage than qualifying for a traditional loan from a Bank. As traditional lenders are bound to use strict guidelines, it’s hard for borrowers to qualify. However, private lenders follow a more holistic approach and aim at providing aspiring homeowners with the loan they deserve. They don’t focus on borrowers’ credit history; instead, they take the borrower’s assets and income into account. Therefore, the whole process of getting mortgage from private lender is quick and easy. You get fast access to funds.
  • Better Interest Rates 
Private lenders can offer more flexible financing solutions because they have regulatory freedoms. Therefore, the needs of individual customers are easily met. Moreover, private lenders offer a better interest rate. Instead of having a single rate of interest like traditional lenders, they offer a wider range of rates to meet your financial needs. You can also find some lenders who can go up to 90% loan to value. However, 90% LTV are on the homes that are in big cities. You cannot expect such excellent mortgage from banks or other financial institutions.
  •  Inadequate Credit for Qualification
Unlike banks, private lenders don’t ask for your credit history. Even if you lack the adequate credit required to qualify for a loan, a private mortgage can help you. So, even a young home buyer who is new to the country and does not have a good credit history of building up the desired credit score can also look for a private mortgage.
  • Borrowers with Unverifiable Income can get loan
If you are self-employed are you have an irregular and unverifiable source of income, it’s best to take the private mortgage from private lenders. These kinds of borrowers are different from borrowers with a poor credit history because they can have a strong credit history. However, they don’t have any income verification form and documentation needed for lending from banks.

Conclusion: All the benefits mentioned above of private mortgage clearly state that borrowers who wish to buy their dream home but lack a good credit score or any verifiable income must prefer borrowing from a private lender. Also, you don’t need to worry about the lengthy documentation process as everything will be done by the private broker himself