Private Mortgages in Toronto and the Greater Toronto Area

Table of Contents

Fast Approval and Funding
Bruised and Bad Credit
First or Second Mortgages
Interest-Only Payments
Residential and Commercial
Purchase Refinance Equity Takeout
Self-Employed or Cash Income
Income Tax Arrears
Property Tax Arrears
Mortgage Payment Arrears
Past Bankruptcy or Consumer Proposal
Judgments or Collections

For more information, or to apply, call Michael Curry at (416) 912-6200 or use the contact form below.

Characteristics of a private mortgage
Interest rates	7%-18%	Private mortgage rates are the highest when compared to prime lenders and should be used as a last resort.
Fees	1%-3%	Private mortgage fees, including broker fees and set-up costs will amount to 1-3% of your mortgage amount.
Terms available	1+ years	Terms on second mortgages are generally one year but can be shorter or extended

What is a Private Mortgage?

A private mortgage is offered by an individual or a business such as a Mortgage Investment Corporation (MIC) who are not a traditional institutional lender such as a bank. The private lender is willing to lend money out to individuals who have equity in their property or home, need funding for a shorter term, and do not qualify for a mortgage by other means. A private mortgage can be a first, second, or third mortgage.

What’s the interest rate going to be?

This will depend on several variables such as existing equity, down payment size, mortgage position, property type and the level of documentation you can produce. Your equity and down payment size will affect the loan-to-value ratio (LTV). If the property is worth or is being purchased for, $1,000,000, and you can put $400,000 down, you only need a $600,000 mortgage. That is a 60% LTV ratio. If you can get that down to 50%, you can expect about a 5-6 percent contract rate, but the higher the ratio, the higher the interest rate, about a point for every 10 percent increase in the ratio. If the private mortgage will be in the second position, the rate goes up as well, because of the additional risk. In the case of non-payment, the first mortgage has to be completely satisfied before any funding can go to the second mortgage.

What fees do I have to pay upfront?

In the example of a residential private mortgage, there is absolutely nothing to pay upfront as far as fees, however, if an appraisal is required you will need to pay for that in advance. With a construction completion mortgage, though, the customer does have to pay a broker fee after gaining approval. In addition, commercial mortgages require an upfront retainer brokerage fee due to the complexity and time involved.

What’s the highest Loan To Value ratio that someone will fund?

Private lenders will typically go as high as 75% on residential real estate in larger cities. Certain lenders will go as high as 85% or even 90%, dependent upon the market and the circumstances. If the property is in a small rural town, most lenders stop at 65% to 75% LTV.

What fees would I have to pay at closing?

Anticipate fees of about 5% to 10% percent of the gross mortgage amount that you are requesting, but the exact amount will depend on the lender. Some of the typical parts of this total are the fees to the lender, the cost of preparing legal documents, title insurance and the cost of the appraisal.

What happens if I can’t get traditional funding at the end of the term with my private lender?

In most cases, our clients get their credit and other elements of their mortgage application in a position to get traditional lending at the end of the term. However, not everyone can get quite there. In those cases, you can usually either renew with the same private lender or refinance with a new private, or “B” lender

What if I can’t get the LTV ratio low enough for approval?

There are not always a lot of choices in this situation. However, if you have other property that has enough equity, blanket mortgages for both properties are a possibility.

Should I use a broker or a direct private lender?

One risk with using a direct private lender is that those transactions are not regulated at the provincial level, leaving the borrower with few protections. Don’t just sign up with any broker, though. Make sure that you work with a broker who is comfortable dealing with private lenders, and make sure that your broker isn’t just shopping your loan to other brokers. You can do this by asking for a breakdown of all the brokerage fees on the proposal. If there are multiple brokerage fees, it’s time to move your loan to a more reputable broker.

How long does it take to get a private mortgage?

Once we get the application package, we can get an answer from a lender within a couple of business days. Once you and the lender have both signed the commitment paperwork, the funding can happen in as few as three more business days.

What documentation is necessary for a private mortgage?

You’ll need to submit two pieces of valid identification, a current mortgage statement, an approved appraisal, a property tax assessment notice and a copy of the home insurance policy, if you’re applying for a private loan to take the place of an existing mortgage. In most cases is all you’ll need if the LTV is at 65% or below. If it’s higher, you’ll need some method of income verification as well.

Can other real estate properties serve as security for a private loan?

If you have equity in other properties, and if your loan application falls above a 75% LTV ratio, adding this other property as collateral often works in what is known as a “blanket mortgage.” Only individual lenders and private lending entities offer this service.

Are there penalties for early prepayment?

If the mortgage is closed, expect a pre-payment penalty of three months’ interest. If the loan is open, though, there is no penalty.

When does a Private Mortgage Make Sense?

You want to purchase land or maybe a property that institutional lenders will not touch because it is outside of their lending guidelines.
You are interested in buying a property or a home that is in major disrepair, and you need financing to fund your renovation.
You have recently been laid off or have lost your job and you need a mortgage to tide you over while you are job searching.
You need to consolidate high-interest debt, but due to bad credit, you have been turned down for refinancing.
You need to access the equity in your home but the penalty to break your current mortgage is too high.
A divorce, illness or some other life-changing event has a major negative impact on your credit rating, and you need mortgage financing until you get back on your feet.
You have credit issues such as bankruptcy that prevent you from getting a mortgage for the full amount that you need from an institutional lender.
You need to take out equity from your property to get you back into good standing with an existing mortgage that is in arrears, power of sale or foreclosure.

What does a Private Mortgage Cost You?

If you are borrowing privately, there will be some costs you will need to cover. Firstly, you will be required to pay for a property appraisal through an appraiser that is approved by the lender. Remember, the lender needs assurance that they are lending against a property that is worth enough to ensure they are financially protected. You can usually expect an appraisal to cost from three to five hundred dollars plus HST, and you are responsible for covering the cost at the time the appraisal is done. Do not pay for an appraisal until you have a lender who has agreed to finance you.

Payments on a private mortgage are usually interest-only payments, which is one of the main reasons this may be a good option for someone with temporary cash flow issues, or an investor. The interest rates are generally higher than a mortgage from other sources. The rate is set case-by-case and is based on the overall scenario. The lower the LTV, the better the mortgage position, and the better your current credit score, the more desirable your rate is likely to be.

Finally, the borrower is responsible for paying the legal fees for both sides of the transaction.

Private Mortgages are available in Toronto GTA, across Canada, and in the following areas in Ontario:
Ajax Alcona Alliston Amherstburg Arnprior Aurora Aylmer Bancroft Barrie Belleville Belleville Blind River Blue Mountains Bracebridge Bradford West Gwillimbury Brampton Brant City Brantford Brantford Brockville Brockville Bruce Mines Burk’s FallsBurlington Caledon Cambridge Carleton Place Casselman Centre Wellington Charlton Clarence-Rockland Cobalt Cobourg Cookstown Cobourg Cochrane Collingwood Cornwall Cornwall Deep River Deseronto Dryden Durham East Gwillimbury Elliot Lake Englehart Erin Espanola Essex Fort Erie Fort Frances Gananoque Georgina Goderich Gore Bay Gravenhurst Napanee Sudbury Grimsby Guelph Haileybury Haldimand County Halton Hills Hamilton Hanover Hawkesbury Hearst Hilton Beach Huntsville Ingersoll Innisfil Iroquois Falls Kapuskasing Kawartha Lakes Kearney Kenora Keswick Kingston Kingsville Kirkland Lake Kitchener Lakeshore LaSalle Latchford Laurentian Hills Leamington Lincoln London Marathon Markham Mattawa Merrickville-Wolford Midland Milton Minto Mississauga Mississippi Mills Mono Moosonee Muskoka New Liskeard New Tecumseth Newbury Newmarket Niagara Falls Niagara-on-the-Lake Norfolk County North Bay North Bay Manitoulin Island Oakville Oil Springs Orangeville Orillia Oshawa Oshawa Ottawa Ottawa – Gatineau Owen Sound Parry Sound Pelham Pembroke Penetanguishene Perth Petawawa Peterborough Petrolia Pickering Plympton-Wyoming Point Edward Port Colborne Port Hope Prescott Prince Edward Quinte West Rainy River Renfrew Richmond Hill Sarnia Saugeen Shores Sault Ste. Marie Shelburne Smiths Falls Smooth Rock Falls South Bruce Peninsula South River Spanish St. Catharines Niagara St. Marys St.Thomas Stratford Sundridge SuttonTecumseh Temiskaming Shores Temiskaming Shores Thessalon Thornloe Thorold Thunder Bay Tillsonburg Tillsonburg Timmins Toronto Uxbridge Vaughan Wasaga Beach Waterloo Welland Westport Whitby Whitchurch-Stouffville Windsor Windsor Woodbridge Woodstock York Region