People seek private mortgages for a variety of reasons. Some are victims of the tighter lending regulations the government placed on banks and other traditional financial institutions in the wake of the financial crisis. Others find that the level of unsecured debt they’re carrying is causing banks to balk at lending them additional funds. While still others pursue private lending in Toronto because they have non-traditional needs that typically fall outside the scope of traditional lending institution guidelines (flipping a fixer-upper for instance). If you are having trouble acquiring funds from a traditional mortgage lender private lending may be your answer.
Private Lending in Toronto: The Smart Alternative
There are a number of reasons why private lenders have become a popular option for those seeking a mortgage. Those reasons include:
- No hassle qualification – With a private mortgage the lenders are typically more concerned with the property involved then they are with every detail of the borrowers past. As such, qualifying for a mortgage through a private lender is typically far easier than it is with a traditional lender, whose primary concern is the ‘bankability’, if you will, of the borrower.
- A good option for fixer-uppers – Typically if a home is in need of extensive repairs or renovation work a bank or other traditional mortgage lender won’t touch it. Private lenders however will often have exactly the opposite reaction. If they believe the home can be fixed up and resold in short order they’ll often sign on to the mortgage.
- Ideal for flipping – While the process of “flipping” homes is nowhere near as prevalent as it was in the run-up to the financial crisis it still occurs and private lending in Toronto is often the best way to obtain financing in order to flip a house. Primarily because traditional lenders are now discouraged by way of regulations from enabling such activity.
- A potential alternative for those with credit issues – Even if you have bad credit you may qualify for a private mortgage if the lender is convinced you have a viable plan to pay the money back on time. Many people with less than stellar credit can secure a home using private lending and as such reinvigorate their finances in the process. The key is finding a property whose value can be quickly increased by targeted renovations so that after 1 or 2 years you’ll be able to resell the house and repay the loan in its entirety (keeping a tidy profit for yourself), or replace the private loan with conventional financing.
Additional Considerations
Before you enter into a private mortgage agreement with anyone you’ll want to make sure you have an exit strategy in place. Particularly if the mortgage is due to mature in just 1 or 2 years. Not having a viable exit strategy may turn off the potential lenders and won’t help you any either when the note comes due. Call RMAI/Loancentral.ca today to find out more about private lending and to find out if you qualify.
