Guiding you home with the perfect mortgage.
The Private lending industry has seen a significant growth among Canadians looking for alternative financing solutions to secure a loan. With the mortgage qualification criteria (stress test) analysis, it is becoming more difficult for some to get a mortgage from a traditional lender. In many cases, borrowers are turned down who would be more than capable of paying back their mortgage and instead left feeling defeated. As an alternative to the major banks, private lenders have more flexibility in the mortgage application process and loan terms thus making them your best choice for your financial needs.
At Uptown Financial Mortgages, we offer more than just competitive rates; we provide a comprehensive range of lending solutions tailored to your unique financial situation. Our team of professional experts are available around the clock working to get you quick financing with seamless approvals. Whether you are facing challenges with credit, self-employed, or dealing with a life-changing event, Uptown can get you approved. With access to a wide variety of lenders, we help clients succeed when traditional lending is not working.
A private lender is a person or organization that lends money to an individual or business who is struggling to get a loan but is not connected to a bank or credit union. They can fund a variety of different loans but the most common are real estate or personal loans. Naturally, private lenders are looking to invest their money with the objective to make a return on investment through the interest the borrower pays on the loan. Mortgage loans from private lenders work just like banks or credit unions, you receive the funds and pay back the amount you borrowed in installments.
When a private mortgage lender is considering your application, they will lend you money based on their risk tolerance which varies across individual lenders. They will assess your ability to make mortgage payments on time while determining whether they will get their money back. If you are unable to make your payments, the lender has the right to take your home and sell it to pay off your debt. Unlike traditional banks who focus on the borrower’s financial history, private lenders look at the true value of your home and the existing equity.
Private lenders operate outside the stringent regulations imposed on traditional banks and non-bank lenders. This flexibility allows them to set their own mortgage terms and rates, and as such often charge much higher interest rates than banks to help lessen their risk. In addition to the private mortgage rates, there is the cost of borrowing which is the private lenders fee based on many factors. The riskier the transaction, the higher the lender fee might be.
To put it simply, private lenders are much more flexible. When you apply for a private mortgage, the approval process is based primarily on the equity of your property rather than your credit score or income history like traditional banks. If you have a low credit score below 600 or fluctuating income, using a private mortgage lender will likely be the only option to becoming a homeowner.
Private mortgage lenders help fill the gap left by traditional lenders and mainly deal with uninsured mortgages. As uninsured mortgages mean a high level of risk, private lenders require borrowers to have an adequate amount of equity in their home. CMHC mortgage insurance requires a minimum credit score of 600. Since most traditional lenders deal with insured mortgages, being unable to qualify for CMHC mortgage insurance will exclude you from these lenders. Lenders may also require you to obtain mortgage insurance even if you make a down payment larger than 20%.
Borrowing from a private lender can help boost your credit score. If you consistently make your payments on time, this will reflect positively on your credit history. A track record of responsible borrowing over 12 months can demonstrate financial reliability, improving your chances of securing more favorable financing in the future.
Choosing Between a Private Mortgage Lender and
a Traditional Mortgage Lender
When deciding between a private lender and a traditional bank, there are several
factors to consider:
Credit History: Traditional lenders often reserve their best rates for borrowers with strong credit scores. However, if your credit history is less than ideal, private lenders are more likely to approve your application, even if it means a higher interest rate.
Speed of Approval: If you need fast approval, private lenders usually have a quicker and more streamlined process than traditional banks, making them a good option for urgent financing needs.
Income Stability: Banks typically require a stable, predictable income. Private lenders, on the other hand, are more flexible and willing to work with self-employed individuals or those with irregular income sources.
Loan Purpose: Private lenders are more open to financing unconventional properties, such as raw land or commercial real estate, which traditional lenders may hesitate to fund.
In Canada, the two major credit reporting agencies are Equifax and TransUnion. You can request your credit score and credit report from both of these agencies, either online or by mail, and in some cases for free. Both agencies also offer additional services, such as credit monitoring, for a fee.
It’s important to note that Equifax and TransUnion only report credit information within Canada. Even though they operate in many countries, including the U.S., your credit history from outside Canada may not be recognized by your financial institution. This can pose challenges for newcomers or recent immigrants to Canada who may have limited Canadian credit history when applying for a mortgage.
Mortgage default insurance, commonly referred to as Canada Mortgage and Housing Corporation (CMHC) insurance, protects your mortgage lender in case you default on your loan. Unlike home insurance, which protects your home and belongings, mortgage default insurance safeguards the lender.
One of the key benefits of CMHC insurance is that it allows you to make a smaller down payment—sometimes as low as 5%. Without CMHC insurance, a minimum down payment of 20% is typically required. CMHC-insured mortgages, or high-ratio mortgages, usually come with lower mortgage rates compared to uninsured mortgages. The savings on your mortgage interest can often help offset the cost of CMHC insurance.
Homeowners with low credit scores
Bad credit or no credit history
New Immigrants
Foreign Income
Self-employed individuals who have difficulty proving income
Real estate investors expanding their portfolio
Borrowers needing to consolidate debt or pay off tax arrear
Those facing foreclosure and in need of a short-term solution
People purchasing unconventional properties that traditional banks may not finance
A private mortgage is a secured loan funded by individuals or private businesses rather than borrowing from traditional financial institutions. They can assist homeowners, homebuyers, real estate investors, real estate developers and custom homebuilders and are typically a short-term solution, ranging from one to three years. These types of loans are often interest-only or amortizing payments giving you a lower carrying cost and monthly payment. Another key factor of a private mortgage is that it can be used to borrow above 80% of your home’s value unlike the banks. Approval is largely based on the equity of your home rather than solely on your income or credit history.
At Uptown Financial Mortgages, we offer a range of private lending solutions to meet your needs:
First and Second Mortgages: We provide financing options whether you are looking for your first mortgage or additional funding on top of your existing mortgage.
Bad credit commercial mortgage: Ideal for businesses or investors with less- than-perfect credit, providing flexible financing for commercial property purchases.
Bridge Financing: Ideal for homeowners in between selling one property and purchasing another. Bridge loans help you manage cash flow during transition periods.
Private construction mortgage: Secure financing to build your dream home or investment property with flexible terms and personalized lending options.
Debt Consolidation Loans: Use your home equity to consolidate high-interest debt and reduce monthly payments, improving your financial situation.
Bad credit home equity loans: Tap into your home’s equity to access funds, even if your credit score isn’t ideal, for a range of financial needs.
Home Renovation Loans: Need to make significant improvements to your property? A private mortgage can fund home renovations that increase the value of your home.
Financing private construction: Whether you’re building from the ground up or expanding an existing property, we offer funding tailored to construction projects.
High-risk mortgage: For borrowers with financial challenges, we offer tailored solutions to secure the funding you need, even with higher risk factors.
Vacant land financing: Obtain financing to purchase vacant land, whether for future development, farming, or investment opportunities.
Consolidate
Debt
Fund Investment Opportunities
Boost
Cash Flow
Home Improvement & Renovation
Secure Business Financing
Benefit from Lower Interest Rates
Pay Tuition or Education Costs
Obtain Auto Financing
Pay Off Mortgage Arrears
Settle Consumer Proposals
Manage
Bankruptcy
Pay Off
Bankruptcy Debts
Private mortgage pros:
A faster approval
process
Urgent financing
needs
No stress test
analysis
Higher loan-to-value ratios
Flexible and customizable terms
Opportunity to improve credit for future loans
Open to people who don’t have traditional sources of income
Option for unconventional properties
Ideal for people with a poor credit history
Private lenders focus on several key factors to determine eligibility:
Property Value and Condition: The value of your home, along with its location and overall condition, is a major factor for private lenders. They will have your property appraised to assess its market value, which helps them determine the risk level of lending to you. Homes in good condition with higher appraised values are generally seen as lower-risk investments.
Home Equity: The amount of equity you have in your home plays a crucial role. The more equity you’ve built, the lower the risk for the lender, which often results in better loan terms. This is especially important for borrowers with poor credit or fluctuating income, as higher equity can offset some of these risk factors.
Location: Properties in desirable or high-demand areas are more attractive to private lenders. Homes in neighborhoods where property values tend to appreciate or remain stable are viewed as safer investments. Lenders are more likely to offer favorable terms if your property is located in a desirable area.
Existing Equity: The existing equity in your home—the difference between your home’s value and the remaining balance on your mortgage—can significantly impact your loan approval. If you have substantial equity, private lenders are more willing to approve higher loan amounts or offer lower interest rates, as this reduces their overall risk.
Potential Returns: Private lenders often charge higher interest rates than traditional lenders to compensate for the added risk they take on. When qualifying you for a mortgage, they will assess the potential return on their investment, factoring in the interest and fees they will collect. Properties that promise a higher return on investment (ROI) may make the lender more willing to take on riskier borrowers.
Credit Score and Income: While private lenders don’t place as much emphasis on credit score and income as traditional lenders, these factors can still play a role in the approval process. A strong credit score or consistent income may help you secure better terms. However, if your credit score is less than ideal, private lenders will likely focus more on the equity and value of your property.
FAQ
Private lenders offer more flexibility in their approval process, focusing primarily on the equity and value of your property, rather than solely on your credit score or income. Traditional banks typically have stricter criteria and require passing the mortgage “stress test”
Private mortgages typically have a much faster approval process than traditional loans. In many cases, you can be approved within a few days, making it an ideal solution for urgent financing needs.
Private lending is especially helpful for individuals with poor credit, those who are self- employed, real estate investors, or anyone who doesn’t meet traditional bank requirements. It’s also suitable for borrowers looking to purchase unconventional properties or consolidate debt.
To apply for a private mortgage, you’ll typically need basic documentation such as proof of property ownership, an appraisal report, and details about your existing mortgage (if applicable). Private lenders may also request information on your income, debts, and credit history, though they tend to place more emphasis on your property’s equity and value.
In addition to interest rates, private mortgages usually come with various fees, such as lender fees, broker fees, and legal fees. Lender fees are typically a percentage of the mortgage amount, while legal and broker fees cover the cost of setting up the mortgage and facilitating the loan. It’s essential to factor in these fees when determining the overall cost of a private mortgage.
Private mortgages are typically short-term loans, with terms ranging from 1 to 3 years. These loans are designed to provide temporary financing while you work on improving your financial situation, building equity, or transitioning to a traditional mortgage.
Interest rates on private mortgages are generally higher than those of traditional mortgages due to the increased risk taken by private lenders. Rates can vary depending on the lender, the loan-to-value ratio, and the borrower’s financial situation. It’s important to compare rates from different private lenders to ensure you’re getting the best deal possible.
Yes, private lenders are often more flexible with self-employed individuals. Unlike traditional lenders who rely heavily on proof of stable income, private lenders place more focus on the value and equity of your property. This makes private mortgages a great option for self-employed borrowers who may have fluctuating income.
At Uptown Financial Mortgages, we are committed to finding the best private lending solution for you. Contact us today to explore your options and get started on the path to financial stability.