Why opt for a private mortgage loan?

Due to the contraction of mortgage rules that came into effect in June 2021, Canadian households are increasingly using private mortgages for the purchase of a new property, renovation or investment in a project.Private mortgage lenders offer a more flexible alternative although interest rates are higher than traditional mortgages.In this article, we will explain how private mortgage loans work.A private mortgage loan is a loan granted by an individual or a financing company other than banks and traditional lenders, which lends money to the customer by taking their property as collateral.This financing solution is suitable for people who are unable to obtain a traditional mortgage loan.Private mortgage loans are attractive for people who need to buy a new home or start a project, but are refused financing by traditional financial institutions.Private lenders are also useful for people who are looking for quick financing and cannot wait for the long process of traditional lenders.They are also suitable for people with bad credit, who have declared bankruptcy or who have irregular or unverifiable income.The process of obtaining a private mortgage loan is similar to that of a traditional mortgage loan, the private lender reviews the client's financial situation, credit score, property equity and project risk.The private lender also checks the eligibility criteria, which may vary from one mortgagee to another.Private lenders offer mortgage products such as residential and commercial mortgages.Interest rates for private mortgages are significantly higher than those for traditional mortgages, typically varying between 10-18%, depending on financial market circumstances and the source of funding.Brokerage fees and application fees, between 1 and 3% of the mortgage amount, may also be added.In conclusion, private mortgages are an attractive option for people who have difficulty obtaining a traditional mortgage.However, higher interest rates and additional fees should be considered when considering financing options.Written by Kenny Bruton