Private Lending

Private Lending

If you’re facing challenges getting approved by lenders for a mortgage, it’s not the end.

With the help of a licensed mortgage broker, your chances of being approved for a mortgage can be increased significantly through private lending!

Reasons You May Be In The Market For Private Lending

Traditional lenders must adhere to strict laws and regulations as set out by the government and financial overseers. Many of these regulations were enacted shortly after the housing market crash (AKA the Great Recession) of 2008. These regulations were activated to better align borrowers with receiving mortgages they can afford.

Lower Risk Borrowers = Less Mortgage Defaults = A Stronger Economy.

The current strategy with traditional mortgages is to be more conservative with lending. This means that there are certain times you may not qualify for a mortgage, even though financially you can afford it.

Reasons Private Lending May Not Work

Being denied a mortgage through a traditional lender may occur if you:

Have bad credit or carry a low credit score individuals in this category may benefit from familiarizing themselves with credit 101 or seeking alternative ways to consolidate debts

Are self-employed self-employed individuals are sometimes deemed high-risk due to challenges in proving their income/being capable of providing a consistent stream of income to lenders; working alongside a licensed mortgage broker will greatly improve the chances of your file being approved!

Are a first time home buyer battling to save up for the minimum required down payment a licensed mortgage broker will be able to help you determine if you’re eligible for the First Time Home Buyers Incentive – if you don’t meet the requirements, private lending may be a suitable backup option

So what can you do if the banks have said no, but you’re sure you can afford a home?

Turn to private lending!

A, B, C’s Of Private Lending

Private lenders can help you enter the market when other traditional lending options are exhausted. Private lenders aren’t connected to the banks or credit unions, which is why they have the flexibility to create their own rules and regulations (generally approving mortgage applications on a case-by-case basis).

“That’s great! So is it easier to get approved for a mortgage through a private lender?”

The barriers to entry for mortgages with private lenders are often lower than the barriers to entry for alternative lending (B-lenders). In fact, private lenders are the easiest type of lender to be approved for a loan through.

“Then why doesn’t everyone just go with private lenders instead of applying for stricter mortgages through the banks!?”

Private lenders are more likely to take on risky clientele, but in exchange for their own risk mitigation/profit intake.

This means that there are some risks involved with private lending to be aware of:

• Private lenders sometimes have a lower tolerance for delinquent payments and may act quicker than traditional lenders to foreclose your property if you default on your mortgage
• Because borrowers from private lenders are often higher-risk, private lenders must protect themselves by charging higher interest rates (between 6-18%)
• The length of a private lending contract is often for a significantly shorter term than traditional lending
• There are usually extra fees involved with private lending
• Private lending is not regulated federally (which is why contacting a licensed mortgage broker for assisting you with arranging private lending is essential; licensed mortgage brokers are experts in the borrowing industry and are knowledgeable about which private lenders are ethical and which ones are the most suited to your financial situation)

Keep in mind, there are still many benefits to private lending. Simply put, these benefits include:

• Low barriers to approval, easier to qualify for a mortgage
• A quicker loan approval process
• No stress test involved
• Ability to create extra funding for renovation projects through a bridge loan
• Some private lenders offer more flexible amortization periods (up to 35 years)

The Takeaway

Overall, private lending can be a great option for borrowers who are facing challenges with getting approved by traditional lenders.

Private lending is often a great stepping-stone until borrowers find themselves in a financial position to be approved by traditional lenders.

Has Your Interest Been Peaked For Private Lending?

If you have questions regarding whether private lending may be a suitable option for your best interests, let's connect.

I’m Kyle Benzies (licensed mortgage broker); I'd be happy to learn about your unique borrowing situation to find the perfect mortgage solution fit specifically for YOU.

Give me a call to discuss your mortgage options and to explore the possibility of private lending!

***other conditions may apply to anything listed above. The information provided on this page should NOT be implicitly relied upon, and may not be 100% up to date. It's best to contact us for the most current conditions/program offerings for first time buyers***