More Canadians than ever before have become familiar with private mortgage options after feeling the effects of the stringent stress test mortgage qualification rules introduced in January 2018.
While private mortgages have been around for many years, they were often a last resort for those who had credit issues and needed options to turn their situations around. And, while this is still a solution for those with blemished credit, if you’re self-employed or building a new home, for instance, you’ll also benefit from understanding your private mortgage options.
Hit the reset button
Sometimes all you need is a temporary fix to help you out of a tight situation while, at other times, it may take longer to move back over to traditional lending. The great thing about private terms is that they’re shorter – typically a year or two – and flexible, meaning you can pay them off at any time without penalty.
And while traditional mortgage financing looks at your credit score to determine qualification, private financing is equity-based. In other words, private lenders want to know that they’ll be able to easily sell your property should the mortgage go into foreclosure.
You can expect to pay higher interest rates as well as lender/broker fees due to the complexity of private deals but, at the same time, you’ll benefit from the opportunity to clean up your credit, establish yourself as a self-employed business owner or otherwise improve your chances of qualification for a traditional mortgage.
Private lending is a great option to have available when you need it most to keep you in your home or help you purchase your first home now as opposed to continuing to rent and pay down someone else’s mortgage.
Regardless of the reason you’re unable to qualify for a mortgage with traditional lenders, the private alternative can be a lifesaver. The key is to ensure you don’t become debt-ridden again or fall into the same circumstances that left you with few options in the first place.
Wondering if a private mortgage may be right for you? Answers are just a call or email away!