Private Mortgages

Written by: Denise Laframboise

Private mortgages are expensive and are only something I will enter a client into if we have a very clear exit strategy and the benefits outweigh the risks. Typically a private mortgage will carry a 1-3% fee and be at a high interest rate.

So what are three situations where we typically use private lending?

  1. The top reason to use a private lender is for deposit money. Say you have your home listed for sale and while you are waiting for a buyer, you stumble upon the house of your dreams. You want to buy the house but all your money is tied up in the home that is for sale. A private lender is a great option to get your deposit money until your home sells, and you can access your funds.
  2. The second scenario to use private lending, is to bridge funds from a home that lenders cannot bridge from. Conventional lenders do not bridge a mortgage from a home that is not firmly sold yet (even if it is listed for sale), or from a matrimonial home to one half of a couple during a separation/divorce.
  3. The third situation is for someone who is having a hard time paying their bills and their credit is suffering. Say a client is six months from the renewal of their mortgage, and their credit score and profile is too low to qualify at their maturity date. We can take all their unsecured debt and bundle it into a private mortgage - essentially paying it all off on the bureau. Clearing up the clients credit issues definitely sees an increase in credit score, which can then have them successfully qualifying for their mortgage at renewal.

What you will notice about all these scenarios is that they are short term and there are exit strategies for each one. Using private lending has to make sense for the client and in these three scenarios it often does. We have private lenders that can provide us with funds within 24 hours, should you fit into the above scenarios or something else that could use their funds wisely.

For more information, contact us to discuss private lending today.

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