Bank lenders are a very popular option for homeowners, but many people cannot meet their strict requirements. These traditional lenders will insist on high credit scores, good income, and good employment history. Private lenders only focus on the property itself, allowing people to get a mortgage if a bank has rejected them.
Mortgage Broker Store can help people looking for a private mortgage, whether looking for a condo, luxury home or single-family home in the area. People looking for a second mortgage can also get a private loan with the proper equity.
Overview of Guelph's Housing Market
The rating website Area Vibes gives Guelph a 90 out of 100 score for livability. Specifically, housing gets an A+ rating. This is in spite of the fact that the average home price in the area is higher than the national average. This can lead to some affordability challenges, even for people who already own a home in Guelph.
Situations like unexpected home repairs can crop up quickly, and that's where a private loan based on equity helps. For example, HomeStars pegs the average cost for a plumber to come in on a service call at $58 to $260 an hour.
It's important to remember that a private lender might even finance a second mortgage if you have bad credit or low income. Private lenders use what's called a Loan-to-Value (LTV) ratio. The LTV is the ratio of the amount of the loans to the appraised value of the property.
The formula looks like this:
- LTV = Loan Amount / Appraised Value of the Property
So, if a property is valued at $400,000 and a borrower wants a loan of $300,000, the formula for LTV works out to be 75%.
They Maximize Private Lending Options
Guelph is well known as an excellent place to buy a home and raise a family. There is a diverse selection of neighbourhoods for people, including Onward Willow and Two Rivers.
People living in these neighbourhoods and others need to remember that private loans have a streamlined application process. They focus on equity rather than credit score and even consider alternative sources of income. So, if you're a seasonal worker or a contract worker in Guelph, you can apply for one of these loans. The same can be said for freelance and self-employed work.
A private mortgage loan is another good option if you need the money quickly. The streamlined process means these can be approved faster than traditional loans. Regardless of the neighbourhood you live in, a private lender can customize a product that fits your financial situation.
Tips for Guelph Residents on Optimizing Private Lending
Having the right amount of equity is critical to getting a private loan. Equity is the amount of your house that you own. In other words, it's the part that isn't financed and has already been paid off.
Private lenders use this equity when they are accepting and rejecting applications. A big part of it is having a proper home appraisal done. That gives the homeowner an accurate idea of the market value of their property.
Property owners and homeowners need to look at their equity to start the process of getting one of these alternative loans. You want to get a qualified professional to do the job for you.
Homeowners in Guelph can prepare for an appraisal with some simple, quick fixes. Taking the time to remove weeds from their front lawns and trimming hedges can make a difference. even buying some new hardware for your front door is a good idea.
Take some time before an appraisal to do minor repairs, like fixing a leaky faucet. Don't forget to take the time to list any of the repairs and renovations you've done.
Regulatory Insights: Understanding Licensing Requirements for Private Lenders in Guelph
Mortgage brokers who work with private lenders and private lenders must follow the Mortgage Brokerages, Lenders, and Administrators Act. The Financial Services Regulatory Authority of Ontario (FSRA) ensures that mortgage brokers follow the Act. While there is no direct regulatory body for private mortgage lenders, these lenders must work with a licensed mortgage brokerage or become licensed themselves.
FSRA has several classes of license for mortgage agents and brokers. A level 1 license allows an to offer only bank and A tier lender mortgages. A level 2 license allows an agent to offer A lender mortgages or alternative lender mortgages. A broker licensee gives the person the ability to run an entire mortgage brokerage as well as process any kind of mortgage. Ensure that you are working with at least a level 2 agent when looking for a private mortgage.
Interest Rates and Lending Terms in Guelph
If you're looking to get a private loan in Guelph, you'll need to consider that interest rates are higher with one of these alternative lenders. They take on a bigger risk partially because their lending criteria are more flexible. For example, a private lender puts more emphasis on equity than credit scores. They will also consider alternative sources of income that traditional institutions pass over, like money made on a contract basis.
In general, private mortgage lenders will offer rates that are around twice the current bank rates. As of August 2024, most private lenders are offering rates between 8% and 12%. There are also higher setup fees to consider with private lenders. You can expect to pay between 4% to 8% of the total mortgage amount in lender, broker, and legal fees. These mortgages are usually offered with 1 year terms, interest only payments, and are renewal at the end of the term at the lender’s discretion.
More flexible lending terms offset the higher interest rates.
Are You Looking for Private Mortgage Solutions?
Mortgage Broker Store can help you with competitive private mortgage or loan rates. One of our priorities is loans that don’t meet traditional lending institution requirements. Unlike many competitors, we are both a direct private mortgage lender and a mortgage brokerage.
Our team includes private lenders, brokers, and real estate agents. Let us help you prepare for and get a product that meets your requirements.
Email [email protected] or call 416-499-2122.