If you’re looking for a private mortgage or want to learn more about how private mortgages work, then let me give you a quick run down of how our service works.
First of all, we will consider private mortgage requirements on all types of properties including those carrying residential, commercial or business industrial classifications, both in and outside of Atlantic Canada.
Here are the answers to the most frequently asked questions we get.
Like with most forms of financing, the answer will depend on the property, the borrower’s profile, and how the borrower plans to repay the mortgage at the end of the term.
On average, private mortgages registered in first position are provided up to a loan to value of 75%. Although banks and trust companies now go to 80% Loan to Value on 1st mortgages (conventional), private lenders rarely go to 80% on private 1st mortgages.
For second mortgages, once again depending on the property and application particulars, financing can be arranged up to 90% of the property’s fair market value. The average for second mortgages is approximately 75%
Note: We do not provide 100% financing on any property
Many people will call us, expecting to hear that private mortgage lenders are prepared to take on any type of risk up to an including lending against 100% of the property value.
And while there may be that type of hard money out there somewhere, its not something we work with.
So If you’re looking for 100% private mortgage financing of a property,
I won’t be able to help you and don’t want to waste your time.
My goal is to provide good value and service to both the borrower and the lender with the intent to try and create a win/win scenario.
Any private mortgage that we place is done so with this in mind.
90% of the private mortgages we place are for a term of one year.
It is possible to secure long terms in some situations. And many times additional years can be offered with renew conditions.
Interest rates can vary considerably from deal to deal, but for a first mortgage position rates will typically range from 7.5% to 10% and for a second mortgage position, rates will typically range from 10% to 15%. Again, the actual quoted rate provide by one of our private mortgage lenders will be based on the individual lender’s assessment of risk for a given property and borrowing scenario.
The standard mortgage offers we work with have a fee to be paid on closing. And once again, the actual fees charged will be quoted on a deal by deal basis.
Each individual private lender is going to make their own determination as to whether or not your credit rating and credit profile has any bearing on their lending decision.
And yes, there are times when you’re credit profile will cause a private lender to not be interested at all in the deal or charge higher rates and provide lower loan to value amounts.
When a credit profile reflects the applicants complete disregard for managing credit responsibilities and shows habitual late payments and defaults on credit facilities reported to the credit reporting agencies, then there is a good chance many private lenders are not going to be interested as they do not want to manage something that’s likely going to be problematic.
That being said, there is risk in all deals and even very low credit scores can be financed, but potentially at higher rates and lower leverage.
To apply for a private mortgage, your first step is to give me a call at forward an email so I can conduct a quick phone interview with you to fully understand your requirements, the reason for financing, the period you’re working with, and the specifics of the property you are providing as collateral as well as any existing charges against it.
My goal is to determine as quickly as possible whether or not I have a potential solution for you. In most cases, I can determine this by the end of our first call.
If I can’t help you, I will tell you so immediately as the last thing I want to do is waste your time or have you send me a bunch of information that isn’t going to help you get what you’re after.
I realize that in many cases time is short, so I try to provide you with immediate feedback so you know where you stand with your request for financing.
If the information you provide in our initial call supports the funding request with one of our lenders, then I will send you an application form along with a list of all the other documents I will require to complete the application package with one or more specific private lenders in mind.
Because I have direct relationships with most of the private lenders we work with, I have a solid understanding of what they are looking for, so within a matter of hours we can potentially get an approval from the lender to proceed with a term sheet followed shortly there after by a formal commitment once the lender has completed whatever due diligence may be required.
As mentioned on other areas of this site, it is possible to get a private mortgage in place in two to five business days, with the average deal taking seven to ten business days to complete from time of application to funding.
The more complex the deal, the longer the process is going to take and with larger deals, there are times the financing request may need to be syndicated or shared among a number of lenders, which will take more time to arrange and coordinate.
Once again the answer depends, but on average the best answer would be “not long”.
Private lenders are in and out of funds all the time as they place funds when money is available to them. If you have an offer and wait too long, the private lender may end up placing the funds offered into another deal.
The other side of the coin is that most private lenders are individual business people making their own subjective assessment of each lending opportunity. If you’re taking too long to decide on a deal, or if the deal is taking some unexpected twists and turns, they can potentially pull their offer at any time.
This is why shopping around for the best rate when you don’t have much time to work with can really back fire in that any and all offers you receive will likely have a limited shelf life, so if you put an offer on hold, there is a good chance it won’t be there if you choose to revisit it.
If you are in need of a private mortgage or want to better understand your options, I suggest that you email right now so we can quickly discuss your requirements and determine what the most relevant options are for you to consider.