How Does Private Mortgage Lending Work in BC?

Private Mortgage Lending allows Canadians to qualify for a private mortgage loan to purchase a property (as opposed to a larger recognized financial institution, like TD or RBC). Most private lenders are offered by individuals or mortgage investment corporations which makes for a less stringent qualification & lending process.

However, it is important to consider that interest rates with private lenders may be significantly higher than traditional lenders because the payments are often interest-only. Therefore, borrowers will not be paying for the amount of the loan, but rather the interest, causing borrowing costs to be larger by the end of the term.

Generally in order to receive a loan from a traditional lender, you’ll have to be in good financial standing, strong credit score, and meet other necessary requirements for approval. If you don’t meet those requirements, private mortgage lending is an alternative for Canadians to purchase a home in BC.

How To Get A Private Mortgage?

As mentioned, getting a loan from private lenders is usually easier than traditional banks. However, there are still some requirements needed to qualify for a private mortgage:

Proof of Income

You’ll have to provide proof that you have the necessary income to meet the required mortgage payments. Additional documents may be needed for self employed individuals.

Down Payment or Loan to Value Ratio 

To receive a private mortgage, a down payment of at least 15% is required to be approved or a loan to value ratio should be no greater than 85%. 

State of the Property

If the borrower backs out on the deal or is no longer able to make payments, the state of property will also be taken into consideration. The lender will want to take ownership or even resell the property to regain lost investment. 

If you are able to provide the proper documents, then you’ll be able to get a private mortgage loan faster than your typical bank or credit union. However it is also important to understand that it may come with higher interest rates, additional fees, and risks.

There is a lot to take care of when it comes to the purchase or sale or refinancing of real estate. We understand this, and know that you will have many other things to take care of during this time. 

If you have questions about getting a mortgage or purchasing homes, contact us today and let our team of experienced real estate lawyers help you!