Private Mortgage Lenders Surrey, BC
Are you looking for a Private Mortgage Lenders Surrey, BC? Or,
Are you in the market for a mortgage and you can’t get a mortgage with a bank or credit union? Are you just looking for an alternative to a bank or credit union? Well, that is what private mortgage lenders, also known as non-bank lenders, are for. They provide an alternative to the banks to help you get into a home and finance a mortgage. Private mortgages are a type of B lender, meaning they fall under different regulations than a traditional bank. The fact is, there are so many different types of lenders out there to choose from, a private lender is just one of the many.
What is a Private Mortgage Lender?
A private mortgage lender is essentially an individual or institution that isn’t a bank. They see financing a mortgage as an investment and are more likely to finance those with lower credit scores or poor financial history. Private lenders are also more likely to finance loans for unique types of housing, have a source of income that isn’t traditional or are only purchasing for the short term.
Because, in Canada, private mortgage lenders differ from the banks, their loan terms are often shorter than the banks. While a traditional financial institution will finance a loan from 3 years to 5 years for a mortgage term, private lenders tend to finance anywhere from 6 months to 3 years. These short-term loans can come with higher interest rates, though, depending on your individual financial situation. The good news is though, if you do have a high interest rate through a private lender, then these payments are reported to the credit bureaus. This will help with your credit score, increasing your chances of getting a lower interest rate when you renew.
Types of Private Mortgage Lenders in Canada
Essentially there are 3 different types of private mortgage lenders. While there are certain rules all lenders have to follow when giving money for a mortgage, lenders that aren’t federally regulated have a bit more flexibility than that of traditional lenders.
- Mortgage Investment Corporations
- Individuals who invest private funds and charge interest
- Investor groups
Whichever private lender you decide to go with, there is normally only interest payments required for the short term that they are active. Using one of these types of private mortgage solutions essentially allows you to build your credit in order to refinance your mortgage at a lower interest rate.
Reasons for Using a Private Lender
While using a private mortgage can be a bit scarier than using a traditional lender like a bank or credit union, there are many reasons why you may choose to use a private lender. Here are a few reasons why you may choose to, or can only get a loan with a private lender.
- Don’t have time to wait for a traditional mortgage loan approval.
- Have a poor credit score
- Need money for home repairs or other emergencies (home equity)
- Buying a property that is considered non-traditional by a bank or credit union
- Debt consolidation (Consolidation mortgage)
- Stop a power of sale or even a foreclosure
Because most private mortgage lenders only do short term situations, these are ideal if you need money fast, just until you can secure a traditional mortgage. Other private lenders will factor principal payments in, but it just depends which of the many private money lenders you use. Some private lenders will even finance a longer term.
That being said though, just because they make you an offer, that doesn’t mean that you need to accept it. Ultimately, you need to select the offer that makes the most sense to you. This is different for everyone. Before you agree though, verify that you are able to comfortably make your payments and select a term that makes the most sense to you. Depending on the mortgage loan that you go with, you may be able to refinance early with little to no penalty. Many private lenders, even though they have higher interest rates, are more likely to go with an open term loan over a closed term loan. Make sure you understand which is which. This will also help you avoid any unnecessary penalties.
First Time Buyers and Private Lenders
Most private lenders will lend to first time home buyers, that being said though, you may still not be able to get a mortgage with a private lender if you have bad credit or even a slightly lower credit score. There is a reason for this. As a first-time home buyer, you are allowed to put as little as 5% down on a home. Mortgages that have less than 20% down payment are required to have CMHC insurance. In order to qualify for CMHC insurance you need to have a credit score of at least 680 or higher,
The CMHC used to allow a credit score of 600, but it has just recently changed to 680. Mortgage rules are becoming stricter making it much more difficult for first time home buyers. That being said, depending on the amount you are purchasing a home for and putting down 20%, you may not be required to get CMHC insurance giving lenders more wiggle room when it comes to mortgage approvals.
Mortgage Rates with Private Mortgage Lenders Surrey
Private mortgage loan rates often have slightly higher percentage rates than that of traditional lenders. On top of that, they also change their rate based on the LTV (Loan to Value) ratio of the mortgage. This is how much you are borrowing compared to how much the home is worth.
The lowest rate using a private lender will be under 60% LTV, It will be slightly higher with an LTV of 70% and the highest will be with an 80% LTV. Anything higher than that is quite risky for private lenders, and they are very unlikely to lend with a LTC higher than 80%.
Along with the mortgage rate, for a first mortgage there will usually be a lender fee of around 1.5%, with that number rising up to 2% for second mortgages. These rates are on top of the 3%-6% broker fees. This alone puts rates 3-4% above traditional lenders.
Private Mortgage Lenders and B Lenders Surrey, BC
While private mortgages are considered to be B lenders, B lenders range wider than just private lenders. They also include some credit unions, and a wide range of different alternative lenders. While many B lenders do not advertise to the public, private lenders don’t at all. The most common way to get a loan through a B lender is by using a mortgage broker.
Mortgage brokers go take your information and use it to reach out to A and B lenders. These lenders then will then let your mortgage broker know if you are approved and what the rate and payments will look like. From there, you are able to decide which lender you would like to choose for your loan.
The important thing to keep in mind if you have to go with a private lender or B lender, is that it isn’t always more expensive than a traditional bank. Sometimes there are just extenuating circumstances for the bank being able to lend to you. An example of this is mobile home mortgages. These types of mortgage loans normally are done through private and B lenders. Most traditional banks do not lend for these mortgages because the land isn’t usually owned.
Private Mortgage Lenders Surrey, BC
If you live in British Columbia, you know that housing prices are higher than they have ever been. Combine that with the CMHC insurance increasing the minimum credit score to 680 and the Bank of Canada increasing prime rates, getting a mortgage can be extremely difficult right now. That being said, people still need to live and that may include purchasing a home. Even with the higher interest rates, the cost of rent has risen tremendously so owning is still the cheaper option for a lot of people.
Because of this many British Columbians are going with private mortgage lenders Surrey in order to get the mortgage that they need. As mentioned above, in order to get an alternative mortgage, your best option is to go through a mortgage broker. A mortgage broker will look at options from not only the best private mortgage lenders Surrey, they will also try to get offers from traditional lenders. Not only does this save you time from having to go from financial institution to financial institution, it helps to ensure you are able to secure a mortgage.
Contact Lakhvinder Gill today, for all types of mortgages which includes Private Mortgages, Residential Mortgages and Commercial Mortgages.
