Private lending is a catch-all term used to describe individual investors OR mortgage investment corporations providing financing for real estate. Sometimes referred to as a lender of last resort or a great short term solution. Private lending can be an effective tool depending on the circumstances. In some cases, where the financing is specialized or niche, like vacant land it can be the only option available.
Some areas where private financing can assist include:
- Low Credit Score, Past Bankruptcy
- High Debt Servicing Ratios
- No Income Confirmation is Available
- Tear Down/ Flips
- Bridge Financing
- Agricultural/Industrial/Commercial Financing
- Construction Financing
Private mortgage rates start at typically 2-5% higher than regular mortgage rates, and are most commonly 6 to 12 month terms. Lender fees range depending on the size of the mortgage but will typically be 2-3%. Broker fees vary depending on the complexity of the file but will typically range from 1-2%.
Private lenders will use their own lawyer and charge a separate set of legal fees for the transaction as opposed to financial institutions which may utilize one lawyer for the entire file. These costs vary but are typically around $2,500.
Private mortgages can be used strategically and it’s important to discuss your investment strategy including potentially your exit strategy with your mortgage broker.
It is important to review the schedule of fees in your mortgage commitment with your broker and lawyer to discuss prepayment penalties, discharge fees, renewal terms and all other costs that may be incurred.
Mortgages.ca has a group of vetted and trusted private lenders both individual and groups who can help finance all types of deals.