If you’ve found it challenging to secure a traditional mortgage, you’re not alone. Many Canadians, especially those with credit issues, self-employment, or recent immigration, face similar hurdles. The good news is that private mortgages provide a flexible alternative, offering relief to those who don’t fit the typical borrower profile.
This blog will explore who should consider a private mortgage, how it differs from traditional options, and why it could be the ideal solution for your unique financial needs.
What is a Private Mortgage?
A private mortgage is a loan offered by an individual or a non-traditional lender, such as a private lending company. Unlike banks and credit unions, private lenders focus on the equity in your home rather than your credit score or income. They assess the value of your property based on its current market value and potential, making it a more accessible option for individuals who may not meet the strict criteria of traditional lenders.
If you’re unfamiliar with how private mortgages work, our previous blog, What is a Private Mortgage?, provides more detailed insights.
Who Should Consider a Private Mortgage?
Traditional lenders have strict guidelines on who they lend to, and private mortgages are ideal for people in specific financial situations who need access to mortgage financing. Here are some scenarios where a private mortgage may be right for you:
- People with Credit Issues
If you have insufficient credit history or your credit score is lower than the requirements set by traditional lenders, a private mortgage could be the perfect solution. Maybe you missed a car payment or a few credit card payments due to the higher interest rate and high inflation. Banks often reject applications due to bad credit, even if you have sufficient equity in your home. With a private mortgage, lenders focus on the value of your property rather than your credit score, allowing you to secure the financing you need.
Do you need help with your credit situation? Our Understanding Private Mortgage Rates and Fees blog can help you better understand how private lenders assess risk.
- Self-Employed or Non-Traditional Income
Many self-employed individuals or people with irregular income sources need help to qualify for a traditional mortgage because they cannot provide the required proof of income. Traditional lenders want stable, verifiable income, which can be difficult for freelancers, small business owners, or those with commission-based jobs. Private mortgage lenders are much more flexible and can approve your mortgage based on the equity in your property, even if your income is different.
- Newcomers to Canada
If you’ve recently moved to Canada, you may need an established credit history in the country, making it hard to secure a traditional mortgage. Private mortgages can be an excellent option for newcomers who have difficulty meeting the credit and income standards required by banks. With a private mortgage, you’ll be able to secure the financing you need without the need for a Canadian credit history.
- Investors Purchasing Unconventional Properties
Banks tend to refrain from lending on unconventional properties, such as vacant land, fixer-uppers, or some commercial properties; these assets are considered too risky. Private mortgage lenders are often more willing to finance these types of properties because their criteria focus on the market value and potential of the property, not just its current state. If you’re looking to invest in an unconventional property, a private mortgage may be your best bet.
- Borrowers Needing Fast Access to Funds
If you’re in need of quick financing, a private mortgage can provide a much faster approval process compared to traditional lenders. Private lenders can approve your loan in as little as 24 hours and have the funds available within days, giving you the reassurance and confidence you need in time-sensitive situations.
How Does a Private Mortgage Work?
Private mortgages are typically short-term loans, ranging from six months to three years. The approval process focuses on the equity in your property, not your income or credit score, which allows for faster and more flexible approvals. However, because private mortgages carry more risk for the lender, they often come with higher interest rates—usually between 4.99% and 15%.
Visit our blog, Understanding Private Mortgage Rates and Fees, to learn more about the rates and fees involved.
Why a Private Mortgage Might Be Right for You
A private mortgage is not a one-size-fits-all solution. However, it offers benefits that may outweigh traditional loans, particularly for individuals with unique financial situations. Here are the key reasons you might want to consider a private mortgage:
- Private lenders offer flexibility that traditional lenders often need help to match. They are more open to various credit scores, income sources, and property types, empowering you to explore a broader range of financial options.
- Fast Approvals: If you need a mortgage fast, private lenders can approve you in as little as 24 hours.
- Alternative Financing: A private mortgage provides an alternative way to secure financing for those who have been turned down by traditional lenders.
However, it’s important to note that private mortgages often come with higher interest rates and fees, and they carry a higher risk for the borrower. They are usually short-term solutions until the borrower can secure traditional financing.
Next Steps: Get Approved for a Private Mortgage Today
If any of the above situations sound familiar, a private mortgage might be your perfect solution. At Sunlite Mortgage, we specialize in helping individuals with unique financial needs secure private and second mortgages quickly and easily. Our team of experts is here to guide you through the process and get you approved in as little as 24 hours.
Ready to get started? Contact us today to talk to a private mortgage expert and apply online for a no-obligation quote. We’re here to help you find the best private mortgage solution for your unique financial situation.
Talk to a private mortgage expert today and apply online for a no-obligation quote. We can help you find the best private mortgage solution for your needs.
