Private Mortgages in Etobicoke
A short-term option for borrowers who don't fit bank guidelines right now, with a plan to move back.
What is a private mortgage?
A private mortgage is a loan secured against real estate that comes from a private lender, such as an individual investor, a mortgage investment corporation, or a private lending company, instead of a bank or credit union. Private lenders focus mainly on the property and the equity in it, and less on the strict income and credit formulas banks use.
Private mortgages are usually short term, often one to two years, and are commonly interest-only. They are designed as a bridge: a way to solve a problem today while you work toward qualifying for a traditional, or A lender, mortgage again.
Who typically uses a private mortgage in Etobicoke?
Etobicoke homeowners and buyers look at private financing for a range of reasons. Common ones include bruised credit after a difficult period, self-employed income that is real but hard to document the way a bank wants, a short-term bridge between buying and selling, and consolidating high-interest debt when a bank won't approve a refinance.
In each case the private mortgage is a tool for a specific moment, not a long-term home for your mortgage.
How costs differ from a bank mortgage
Private mortgages cost more than bank mortgages. Interest rates are higher because the lender is taking on more risk, and there are usually lender fees and broker fees that a typical bank mortgage does not have. You may also pay for an appraisal and independent legal advice.
Every rate, fee and cost is disclosed to you in writing before you sign anything. You should understand the full cost of the loan, including what happens at the end of the term, before you commit.
Risks and your exit plan
The main risk with a private mortgage is not having a clear way out. If the term ends and you can't renew or move to another lender, you may face renewal fees or pressure to sell. Higher payments can also strain a budget that was already tight.
That is why every private mortgage should start with an exit plan: what needs to improve, such as credit, documented income or debt levels, and how long it will realistically take to qualify with an A lender again. Swapnil works through that plan with you before recommending private financing.
What Swapnil needs from you
- Government-issued photo ID
- Your most recent mortgage statement and property tax bill
- Proof of income: pay stubs, a letter of employment, or for self-employed clients, recent Notices of Assessment and business financials
- Home insurance details for the property
- A list of debts you want to address, with recent statements
- Your plan and timeline for moving back to a traditional lender
Frequently asked questions
Is a private mortgage the same as a second mortgage?
Not exactly. A private mortgage describes who the lender is. It can be a first mortgage or a second mortgage. A second mortgage describes its position on title, behind an existing first mortgage.
How long does a private mortgage usually last?
Most private mortgages run for one to two years. They are meant to be temporary while you improve your situation and move back to a traditional lender.
Will I know all the fees before I sign?
Yes. All rates, lender fees, broker fees and other costs are disclosed to you in writing before you sign. Take the time to review them, and ask questions about anything that is unclear.
Can I get a private mortgage with bad credit?
Private lenders focus mainly on the property and your equity, so credit challenges do not automatically rule you out. Approval still depends on the lender, the property and your overall situation.
How do I move back to a bank later?
Usually by improving the issue that led to private financing, such as rebuilding credit or building two years of documented self-employed income, and then refinancing with an A lender before or at the end of the private term.
Swapnil Patel is a licensed Mortgage Agent Level 2 working with Affinity Mortgage Solutions, part of the Dominion Lending Centres network. Each Office Independently Owned & Operated.
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