If you require mortgage financing on your upcoming home purchase or want to take out a loan to cover renovations, consolidate debt or other uses, there are many lenders to go to. One option most people don’t think about at first is Private Lenders.

Looking for a mortgage is not simple and can be filled with lots of stress and frustration. In Ontario, there are three main types of lenders to go to; A, B, and C lenders. A lenders are your banks, which has the hardest requirements to meet and pass in order to qualify. They prefer near-perfect credit scores, financial stability and low debt. B lenders are trust companies or credit unions that are more flexible in who they approve. You would still require a stable income and any other financial assets to help you get approved, but they are not as strict. C lenders are private lenders and are often ready to finance borrowers with poor credit and non-traditional income (freelance, contract, self-employed). Thus, if you don’t have the best financial situation or have low credit, C Lenders can be your go-to lender for a quick approval.

Why Get A Private Mortgage?

When you have poor credit but need financing, a private mortgage loan can be a good option to help you get the funding you need and not risk approvals falling through. Private mortgages are often for short terms (1-3 years) and can fund quickly (up to 5 days). They also typically require your home as collateral but will overlook poor credit and debt issues.

Most private lenders want to see a minimum of $70,000 in equity in your home, before approving your loan.

Are They Licensed?

Private Lenders, like all mortgage lenders, are regulated by the province of Ontario. All mortgage brokers who offer Private lenders will likely be licensed. However, if a lender is operating independently, being licensed is not a requirement. Though, they are still under the Ontario Mortgage Act and must work within its confines.

While they may not be required to have a license, it is entirely safe to use a private lender in Ontario. As they are regulated by the province, you can rest knowing that you will be fine to use a private lender for your mortgage. Due to their low requirements and quick-to-fund turnaround, using a private lender can be a financially savvy decision to get the funding you need.

What Are Their Rates?

Private Lenders often have higher rates than A and B lenders. Private lender rates average 7-12% and depend on the borrower’s individual situation and credit score. Any fees for taking out a loan from a private lender will also be higher, and range from 3-6% of the total loan amount. This is because they are taking on higher-risk loans compared to A and B lenders which have stricter criteria borrowers need to meet.

If you are needing a mortgage loan but aren’t sure if you qualify for more traditional lenders, set up a free consultation with The Mills Team, an experienced private mortgage broker in Ottawa, to get your questions answered and be guided in the right direction for your financing needs.