What Is Private Mortgage In Canada?
You’re thinking about buying a home, but worried about getting a mortgage. You might also want to consider a private mortgage. Learn about private mortgages in Canada and how they work by reading this blog.
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If you apply for a standard mortgage and the lender turns it down, your dream of buying a home is shattered, but that is not the end. You got the private mortgage in Canada. Keep digging to find out more about a private mortgage.
What is a private mortgage, who can take it, and what risks should you consider before taking one?
These are a few questions you need to get the answers to before approaching a private mortgage lender.
So, let us get started and find out more about Private mortgages.
What is a Private Mortgage?
A private mortgage is a standard mortgage, but the private individuals would fund it, unlike banks, which finance most mortgages. They are short-term loans with high-interest rates taken out by individuals who have a poor credit score. These loans can improve their credit score and help in emergency lending situations.
Who are Private Mortgage Lenders?
Private mortgage lenders are private corporations and individuals who lend out money. In the Greater Toronto Area, Private lenders account for 7 percent of new residential mortgages. For private lenders, risky borrowers and properties seem like excellent opportunities for investments. As you borrow the mortgage by your requirement, the lender benefits from you by obtaining a high rate of interest.
Who can make use of a private mortgage?
You can use private mortgages in the following situations:
- If you do not have sufficient credit, it makes you ineligible for a bank mortgage.
- If you are self-employed and do not have a stable source of income.
- If you do not want to wait for an extended period to acquire money in hand.
- If you want to make an investment in a high-risk property.
- If you want to merge your previous debts through a second mortgage.
What are the risks associated with a private mortgage?
Before taking out a private mortgage, it is important to understand the risks. There are several consequences you may have to face with a private mortgage. Have a look at the few risks mentioned below:
- With the private lenders, you may end up paying a lot more interest rate than you would have paid on a mortgage from a bank.
- If you cannot repay the loan, these private lenders may even take over the property and sell it to pay off the debt.
- The private lenders may also ask you to pay some broker fees.
When thinking of getting a private mortgage, you need to ask a few questions yourself. Are you sure you will pay off the high-interest rate in the agreed period? Are you ready to take risks associated with a private mortgage? If you want to take these risks, then you should approach a private lender. Otherwise, it is always best to put your trust in the banks and credit unions.
There is often a commotion regarding the difference between a loan and a mortgage. Read, ‘How Is Loan Different from Mortgage?’ to know more.
