What is the purpose of Private Lenders?

Ask Angela

Question: What is the purpose of Private Lenders, if you already have Banks and what you call Mono Lenders?

Answer: Private Lenders are becoming more important in the mortgage world, as the Finance Minister tightens mortgage rules.

Here is a break down of the functions of various mortgage lending institutions:

Banks:  some banks will give mortgage brokers lower interest rates for the clients. They have a limited amount of options and products. Clients have to exactly fit with their products. The Bank can only offer their own products, options and services.  The bonus when dealing with a bank is that you can have all your banking in one place, ie credit cards, bank accounts, car loans and mortgages. Very Secure

Mono Lenders:  Usually on line and limited amounts of offices. Only product is mortgages. Pays commissions to brokers for clients.  Low over head.  Competition among the many Mono Lenders, keeps interest rates low. Each have their own niche. One may accept lower credit scores while another may have better prepayment options.
Governed by the same rules that all Canadian Banks must follow. Very secure.

Credit Unions:  They are community based, so may finance a project that no one else will if they can see the value in improving the community.  Credit Unions are based in the community, they will look at funding a mortgage, because they know the community and believe it is non risk, while other lenders in major cities have no idea what the community is like. There motto is 'if it makes sense they will finance it'  Great for small town lending, where the other bigger lenders will not lend because of the population limits.  Very Secure.

Private Lenders: More and more Canadians are not fitting in with the strict rules for mortgages. Private Lenders are becoming more popular.
There are a multitude of reasons why borrowers seek to obtain financing from private lenders.
These include:

• greater restrictions on traditional bank and trust company lending requirements, such as loans based on land value rather than borrower income;
• borrower’s that have a non-salaried income and do not therefore satisfy financial institutions’ structured lending guidelines;
• urgency to complete a transaction; and
• borrower’s with poor or no credit history rates
• construction loans

Private lenders vary from individuals loaning small amounts of money, either directly or through their RSP plan, to mortgage investment corporations that not only lend to individuals for personal borrowing, but also finance land acquisition and pre-development phases of residential construction projects.

As you can see there are many choices to choose from and your mortgage broker narrows down the list, to get you a well planned mortgage that will be truly unique and in the best interests for you.

Always, call a mortgage professional, to get a free no obligation quote.  It can only save you money.

Questions or comments-- akroemer@mortgagegroup.com
                                           250-650-4182

Bank Rates vs Mortgage Broker Rates

 

Ask Angela

 

Question:  My bank just gave me a sweet deal.  The same rate as a mortgage professional quoted. Should I take the sweet deal my bank offered?

 

 

Answer:  With the limited information, I can give you general information on what to look for.

 

1)  What options came with the banks' deal?

 

2) Will the bank give you good prepayment options? Only once a year, anytime or none at all?

 

3)  What will the difference be in penalty calculations? The banks have higher posted rates which is the rate they use for penalty.

 

If you are not sure of any of the above, ask your bank.  Get your mortgage professional to figure out the difference of any of the above scenarios.

 

You may have a good deal or you may have a deal that will not be a sweet deal in the end.

 

Mortgage professionals always will give you free unlimited, unbiased quotes. 

 

Most people these days sign up for a 5 year mortgage, but need to change their mortgage before the 5 year mark, paying thousands in penalties.  It is much better to pay less than more.

 

Call for a mortgage consultation  250-650-4182

 

akroemer@mortgagegroup.com