When applying for any mortgage it is important to fully understand the arrangement that you are entering into. The same is true of private mortgages. These are financed by private individuals or companies. These types of lenders will only offer terms and conditions that are akin to traditional lending institutions, only with a much higher interest rate.
There are several situations where a private mortgage will provide a Canadian with a financial solution. For example; when a shorter closing time is required private mortgages are useful as some private mortgages may close in as quickly as a week, this is in stark contrast to the typical three or four week customary loans found elsewhere. Private mortgages will also work very well in the short-term or if you are employing a bridge financing strategy.
The vast majority of banks will not provide this type of financing – however, private mortgage lenders will. They will charge a premium for their services so before engaging in this option make sure that it is suitable for your needs.
Canadians who are seeking a second mortgage will also consider private mortgage lenders an option for home improvement projects and debt consolidation. The one major advantage to a privately held mortgage is that it will allow the borrower to sidestep any prepayment penalties that may occur. Also, it can allow some relief from the high interest rates of unsecured debt such as credit cards.
Another group who will see private mortgage lenders as an attractive option are Canadians who are unable to meet the qualifications of traditional lending institutions.
Canada’s banks must follow strict regulations that unfortunately don’t always allow for everyone’s unique situations. This makes private mortgage financiers the best chance to secure the loan some people need desperately. Canadians seeking financing for commercial/income properties can look to private mortgages to provide the capital they need when other lending institutions are not interested.