Finding the best private mortgage lender becomes crucial when you need financing for a property purchase or refinance, and traditional lenders are not an option. This decision can significantly impact your home-buying, refinancing, or investment experience, as unlike traditional lenders, private mortgage lenders come in various forms, offering more flexible terms and mortgages ranging from six months to three years.

Private mortgage lenders come in a diverse array, each with unique requirements. From individuals to specialized companies, each offers unique terms of first and second mortgages for commercial and residential mortgages and construction loans. This blog will guide you through finding a reputable private mortgage lender, ensuring you are fully aware of the various options available.

The required loan-to-value for a private mortgage is 80%, which means if you are buying or refinancing a home through a private lender, your equity must be 20% of the purchase price or the equity, and they will likely require approval to verify the property value. Since the introduction of the stress test in 2018, there has been a sharp rise in the usage of Private lenders.

Different Types of Private Mortgage Lenders

1. Individual Lenders: These lenders could be family members, friends, or acquaintances who have the financial means and are willing to lend money for a real estate purchase. The terms and conditions of such loans are often more flexible and are based on personal relationships. However, borrowing from individuals can also strain relationships if repayment issues exist, so clear communication and legal agreements are crucial.
2. Private Investor Groups: Private investor groups, consisting of multiple investors pooling their money to lend to borrowers, offer a more formalized and potentially more secure lending process. The benefit of working with investor groups is the potential for more capital and a structured lending process, giving you a sense of security and confidence in your investment.
3. Hard Money Lenders: Hard money lenders are professionals who provide short-term loans based on the value of the property rather than the borrower’s creditworthiness. Real estate investors or those needing quick, high-interest loans will likely use these lenders. While hard money loans are more expensive than private funds, they provide rapid access to funds for buy-and-flips and buy-renovate-rent-and-refinance (BRRR) investors. They are less concerned with the borrower’s financial history.
4. Private Mortgage Companies Some companies specialize in providing private mortgages. These firms are a hybrid between hard money lenders and traditional lenders, offering more flexible approval processes than banks but maintaining professional lending practices. Private mortgage companies often provide more reliable terms and processes than individual lenders.

Flexibility One of the main benefits of a private mortgage is its flexibility. Private lenders might be open to negotiating terms like the repayment period or interest rate.

Sunlite Mortgage is very active in the private mortgage market and has access to lenders across Canada, offering residential and commercial financing. Contact a Mortgage Expert to find out if a private mortgage could be a solution for you.