Private Lending

Private lending is a rapidly growing sector in the Canadian housing market, and in particular, in Ontario. Private mortgage lenders offer a viable alternative to traditional mortgage lenders, such as banks and credit unions. Private lending provides a solution to borrowers who are facing difficulty securing approval for a mortgage loan due to various reasons, including low credit scores, irregular income sources, or limited Canadian credit history. In this article, we will explore what private mortgage lenders are, who they can help, and what you should know when considering a private mortgage loan.

Private mortgage lenders are private corporations and individuals who lend out their own money. This includes Mortgage Investment Corporations, where money from private investors is pooled to fund syndicated mortgages. Unlike banks and credit unions, private lenders do not accept deposits from the public and are therefore not subject to the same regulations. As a result, private mortgages come with higher interest rates and fees, but they are also easier and quicker to be approved for.

In recent years, private lending has become an increasingly popular choice for homeowners in Canada. Data from the Canada Mortgage and Housing Corporation (CMHC) shows that non-bank lenders originated $183.61 billion worth of mortgage loans in 2021, with private lenders originating close to $100 billion worth of loans. This demonstrates the growing importance of private lending in the Canadian housing market.

Private mortgage lenders can help fill the gap left by traditional lenders and provide a solution for those who have difficulties getting approved for a mortgage. This includes new immigrants who may have limited Canadian credit history and self-employed individuals who may have an irregular income source. Foreign income sources can also present a challenge for borrowers, but private lenders may be able to provide a solution in these cases.

To find a private mortgage lender, most borrowers will need to work with a mortgage broker. Mortgage brokers can help you find the best type of mortgage that is most suitable for your financial situation, negotiate with mortgage lenders, and submit the necessary documents on your behalf. Mortgage brokers may receive a commission or compensation from the lender, but they must disclose the amount to their clients.

Private mortgage lenders are an alternative to traditional A lenders, such as Canada’s Big Six Banks, chartered banks, and credit unions. Banks are regulated by the federal government and are subject to the mortgage stress test, which determines if borrowers can afford to repay their mortgage in the event of a significant interest rate increase. Private lenders, on the other hand, are not subject to the same regulations and are able to offer more flexible solutions to borrowers who may not meet the requirements of traditional lenders.

It is important to note that private mortgage loans are meant to be a temporary solution while borrowers work to improve their finances. Private mortgage loans come with higher interest rates and fees, and borrowers should only consider a private mortgage loan if they are unable to secure approval from a traditional lender. Additionally, it is crucial to compare rates and terms from different private lenders before making a decision, as the rates and fees can vary greatly between lenders.

Feel free to contact Amrita Bhogal Mortgages today to understand if Private Lending is the solution for you!