Sudbury has a great deal to offer the homeowner. As the second-largest metropolitan area in Ontario, with fantastic attractions and a lower cost of living, the city of Sudbury represents an attractive place to raise a family and invest in real estate to call home.
Like anywhere else in the province, Sudbury borrowers are faced with a multitude of financial decisions to make. Some are small and others are on a larger scale. Certainly, the decision to buy a house or even take out an additional mortgage on a property in the Sudbury region that you already own is significant.
Tapping into the real estate market and homeownership represent some of the more significant financial decisions that Ontarians face. Like many Ontarians, Sudbury homeowners may also decide to utilize the existing equity in a home to put towards immediate financial priorities, and taking out a second mortgage on a property needs to be considered carefully.
Fortunately, the Sudbury real estate market continues to outperform many expectations. Looking at second mortgage options or deciding to take out a principal loan on a property represents a great investment.
Before choosing a lender to help secure mortgage financing it is important to be informed about the different streams of lending options that are well established in Ontario. Although the banks tend to leap to mind when seeking mortgage financing, the mortgage industry provides different categories of lenders to help Ontario homeowners reach their mortgage goals.
- A Lenders– These lenders represent the banks. Banks will require very strict criteria to qualify for principal or secondary mortgage financing. Well-publicized mortgage stress tests have been implemented and to secure mortgage loans, these tests must be passed along with demonstrating exemplary credit and substantial and east to demonstrate full-time income.
- B Lenders– These lenders represent credit unions and trust companies. Although the credit score can be lower to secure mortgage loan approval, the criteria for mortgage loan eligibility are significant. Additional assets may need to be demonstrated along with a proven full-time yearly salary.
- C Lenders– These lenders are private lenders. Private lenders are widely available across Ontario. While banks, credit unions, and trust companies require very good credit and traditional yearly income, private lenders will be able to negotiate mortgage loans despite poor credit and regardless of the type of employment including contract or self-employed. Private lenders will look to the appraised value of your home and the degree of equity built in your property as well as property location when determining mortgage loan amounts.
How Do Private Mortgage Loans Work?
For those that have bad credit, private lenders will be able to negotiate mortgage financing on a variety of types of mortgages including:
- Principal Mortgage loans– While the majority of the mortgage loans the banks approve are amortized first mortgages (principal mortgages) with term lengths typically between 25 to 30 years, private principal loans are short-term (1-3 years) and are generally negotiated faster than the banks.
- Home Equity Loans– By tapping into existing equity in your home, home equity loans will enable homeowners to pay for immediate expenses.
- Home Equity Lines of Credit (HELOC)– Similar to home equity loans, HELOC’s utilize existing equity built up in your home. The HELOC is a revolving line of credit that can be accessed as needed. The homeowner makes ongoing interest payments on the line credit
- Home Renovation Loans– Again using home equity, a home renovation loan will free up funds to pay for needed renovation and fixes to your home that will increase living enjoyment and help to increase the resale value of your home.
- Consolidation Loans– If you have multiple debt payments a private consolidation loan can be negotiated to enable all debts to be rolled into one easy monthly payment.
- Bridge financing- If an Ontario homeowner needs immediate financing before another financing becomes available, bridge financing can be negotiated by private lenders to help bridge the financial gap.
Private mortgage loans do have a higher interest rate associated compared to their bank counterparts. However, private loans have the advantage of being short-term, are negotiated quickly, and homeowners can be approved despite poor credit. Generally, private mortgage interest rates tend to range between 7% to 12%, and the fees charged will range from 3% to 6% of the total cost of the loan. Private mortgage loans can be negotiated quickly and the process is quite straightforward. You should be prepared to:
- Gather all relevant paperwork
- Research private lending options in your area
- Arrange to sit down with a private lender
- Bring a recent appraisal and proof of the degree of equity in your home
- Consider a pre-approval if you are applying for a principal mortgage
- Be very familiar with your credit score and credit report
- Know what type of loan you feel would address your short term financial needs
When you are at the point of sitting down with a private lender he/she will be assessing the Loan-To-Value (LTV), assessing the most recent appraisal on your property, and looking at how much equity exists in your home. Generally, a private lender will prefer to see at least 25% equity built in your home.
A private lender will not lend over 75% LTV (which represents 75% of the appraised value of your home). If your home is worth 400,000 dollars then a private lender will not lend more than 300,000 which is 75% of the total value of your home. Credit and salary will also come into play but will not stand in the way of private mortgage financing, unlike the banks and credit unions who rely heavily on credit scores and creditworthiness.
Mortgage Broker Store Can Direct your Mortgage search Despite Credit Issues
At Mortgage Broker Store we are very experienced in all types of mortgage lending options available with specialized knowledge when it comes to private mortgage lending. Don’t let poor credit stand in the way of obtaining mortgage financing to suit your immediate financial priorities. Sudbury-based Private lenders will be able to sit down with you to discuss mortgage options that will suit your unique set of financial circumstances.
With access to a broad network of local private lenders in your area, we are more than happy to address any concerns you may have and help you achieve your mortgage goals despite damaged credit.