While a traditional lender places a great deal of weight on your credit history and income, private lenders focus on the amount of equity in the property.
With the cost of borrowing so high, there’s been an uptick in the number of Canadians taking on private mortgages., according to a recent report by the Financial Services Regulatory Authority of Ontario . Generally one to two years in length, private mortgages are often a temporary option for homeowners until their finances improve. Then, the goal is to switch to a traditional lender, which offers cheaper mortgages and interest rates.“The less qualified the borrower or, the riskier the mortgage being offered, the higher the rate and the higher the lending fee,” explains James Laird, president of CanWise Financial and co-founder of financial comparison site Ratehub.ca.
Those costs can add up. Take a $700,000 mortgage, for example: with a nine per cent interest rate and, say, five per cent in fees, you could be staring down about $98,000 in borrowing costs during the first year. Given how risky they are, Christopher Molder, principal broker at Toronto-based Tridac Mortgages, says private lenders are well protected to enforce the mortgage through something like a
Source: Loan Digest (loandigest.net)
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