Is a private mortgage right for you?

Are you entering the housing market as a buyer this year? Now that the current interest rate hike cycle is over, and conditions are more stable, buying a home may be in the plans for more Canadians. However, as more buyers hit the market, this might also increase the demand for private mortgage products. What is the good and the bad of these products? Here’s what you need to know.

The good and the bad of private financing

So, what’s the benefit of private mortgages? Obviously, they are much more flexible products. They make it easier for buyers to break into the market, no matter what their individual situation is. Plus, private mortgages often have a quicker turnaround time than conventional mortgages. In many cases, a borrower can have their approval within two to five days. Since there are fewer checks and barriers involved, the process is much faster.

On the other hand, all this flexibility comes at a cost in the form of higher interest rates. Since private lenders are financing mortgages for borrowers who might have inconsistent income or credit struggles, they are taking on more risk as the lender. In return, they often charge rates that can reach up to 15 per cent, which is of course much higher than conventional rates. Private borrowers may also need to contribute a larger down payment to give lenders more assurance, which will take time to save. Finally, these products are meant to be short-term solutions, so they certainly will not match every buyer’s needs.

In general, we work with clients to try to secure them financing with a conventional lender. Private mortgages are a specialty product used in specific situations, and while they can be great solutions for some buyers, they are not a perfect fit for everybody. Of course, it can be hard to know if a private or conventional mortgage is right for you, and that’s where we come in! As brokers, we can help you understand your situation and determine which path is best for you. We’re here to evaluate your needs and guide you through the process.

If you have any questions about your mortgage, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.