The tight and restrictive lending standards that banks and other traditional lenders employ result in the denial of mortgages to a large number of people who are capable of making their mortgage payments. Since private lenders often take into account the property’s entire value and marketability rather than just the credit history of the borrower, they see this as an opportunity to supply financing to these individuals.
Why Private Mortgages?
Private mortgages may be an option for people who are having problems getting approved for a conventional mortgage. Home purchasers are increasingly using this kind of borrowing due to the tightening mortgage laws.
Less documentation may be required for a private mortgage, and private lenders may be more accommodating when it comes to credit history. Private mortgages offer additional benefits, but at the cost of a higher interest rate.
In addition to interest-only payments, private mortgages usually have higher payoff amounts since the lender is willing to take on greater risk, which results in higher interest rates. The interest rate you would be looking at could range from 7% to 13%, depending on your credit worthiness, marketability, and mortgage situation.
Factors Private Lenders Look Into When Approving A Mortgage
It is critical to understand the aspects and risks associated with obtaining a private mortgage. If you believe your financial status is uncertain and likely to change soon, or if you believe your mortgage needs are not temporary, you should not pursue a private mortgage.
- Type and value of your property: This ranks among the top considerations for lenders. Your mortgaged property needs to be in good condition and will go through a rigorous appraisal process before being approved. A low credit score makes your application more risky, and the lender will need to protect their investment in the event that you default on your mortgage.
- Making Down Payment: Make a down payment on your mortgage in case you’re buying. A minimum of 85% Loan to Value is what private lenders seek. This implies that in order for your mortgage to be granted, you would need to make a 15% down payment. Lenders also favour larger down payments because they demonstrate greater financial and stakeholder involvement in the property.
- Equity Locked In Your Property: When it comes to equity, private lenders permit an 85% loan to value, similar to purchase mortgages. You can refinance up to $425,000, for instance, if your house is worth $500,000.
When considering a private mortgage by private home loan lenders, consulting your local mortgage broker in Abbotsford can be extremely helpful. Mortgage brokers analyze the benefits and costs of your property, equity, and other factors to determine if private mortgage is right for you and your financial circumstances. If you are looking for a reliable private mortgage broker in Abbotsford, rely on no other than Sandhu & Sran Mortgages. For more details, give us a call today,