Sudbury is one of Ontario’s real estate hotspots, even during the COVID-19 pandemic.
Data shows that Sudbury home values have gone up throughout 2020 due to high sales activity and low supply of new listings.
According to the Canadian Real Estate Association, “Overall supply is currently sitting at the lowest levels in over 30 years.”
The association also reported that 290 units were sold in October 2020, the most ever recorded for that month in Sudbury’s history.
How Sudbury’s Rising Home Values Can Help Homeowners
When your home increases in value, your home equity increases by the same amount.
If you are a Sudbury homeowner, your extra home equity could be enough to help you get the right size loan or mortgage to consolidate debt, make renovations and repairs, or purchase new property, The extra equity can also help you make other investments you wouldn’t be able to otherwise.
Private lenders provide mortgages and other loans based on your home equity. Now that Sudbury homeowners have more home equity, they can work with private lenders and secure larger loans and mortgages if that is what they need.
What is a Private Mortgage?
A private mortgage is simply a mortgage from a private lender and not from a financial institution such as a bank, Trust Company or Credit Union.
A private lender is any individual or business that provides loans backed by real estate.
Why Get a Private Mortgage?
Low Monthly Payments
Private lenders require only the interest to be paid each month. You do not have to make principal payments until you are ready or when the loan term is expiring.
Unusual Property Purchase
Banks and other financial institutions are less inclined to approve mortgages and loans for unconventional properties such as undeveloped plots of land.
Private lenders do not judge the type of property being purchased with a loan or mortgage. If you have enough money for the down payment on the property, or enough equity in the property, you can get a loan from a private lender.
Faster Mortgage Approval
Banks and other major financial institutions can take months to approve mortgages. Private lenders can approve your mortgage in a matter of weeks since they have fewer requirements to consider.
Last Resort Lender
Major financial institutions will only lend to borrowers who meet their strict requirements. Banks require a borrower to have a credit score of at least 680 and proven steady income before even looking at a mortgage application.
These strict requirements tend to make ineligible many borrowers who are self-employed, lack defined income, or are currently managing other debt.
Private lenders do not care about your credit score or income to approve a loan or mortgage. Their requirements relate to a minimum down payment or a minimum amount of equity.
Private Lenders for Bad Credit Mortgages
If major financial institutions have deemed you to have a poor credit score, or low or undeclared income, then they deem you to have ‘bad credit’ and the mortgage you would get from a private lender would be considered a ‘bad credit mortgage’.
This term “bad credit mortgage” is not a value judgment on you but is a financial industry term to signify the risk of lending you money. Banks and other financial institutions will not approve bad credit mortgages or any loans to borrowers with ‘bad credit’.
The good news is that private lenders specialize in bad credit mortgages.
Approval Criteria for Private Mortgages
To qualify for a private mortgage to purchase a property you need a down payment of at least 25 per cent of the value of the property.
To qualify for a second mortgage or another type of home equity loan, you need at least 20 per cent equity in your home.
A private lender does not use your income and credit score for your mortgage approval, but they will use it to determine the interest rate they will charge for the mortgage. The lower your credit score and declared income the higher the interest rate you will be charged.
Generally, private mortgage interest rates range from 10 to 18 per cent and come with fees ranging form 3 to 6 per cent.
Considering a Private Loan in Sudbury?
Throughout 2020 the average price of a residential home in Sudbury has risen nearly 15 per cent from 2019 and 9 per cent from 2016. Private lenders can help Sudbury homeowners utilize their home’s increased value by converting built-up equity into tangible funds. If you are thinking about getting a private loan or mortgage, you can use the Automatic Private Mortgage Pre-Approval tool for free. This tool quickly calculates if you qualify for a private mortgage or loan and provides information about lenders and lending options for you.
It should be easy to find private lenders in Sudbury given the upward trajectory of the city’s real estate market. However, private lenders rarely advertise their services which makes it hard to find them and compare what they offer.
At the Mortgage Broker Store, you can chat with mortgage brokers, free of charge, and find private lenders in your community. They will help you compare different offers and answer all your questions about private lending. Request a quote or call for advice today.