How to Choose the Right Private Lender in Ontario

Posted on 2nd April 2024

Purchasing a home is never a small expense, especially not in Canada these days, as the housing market has recently seen record-high prices for homes in many places.

Therefore, the vast majority of people require a sizable mortgage loan in order to make the purchase of a home feasible. When it comes to such major loans, many people’s immediate instinct is to go to major banks to get this money.

However, there is another possibly more viable option in Ontario that also exists: getting a loan from a private lender. This is also often referred to as a B lender or a subprime mortgage lender.

When a private corporation or individual lends out their own money, they are considered a private lender. This category includes mortgage investment corporations that pool together money from private investors in order to fund syndicated mortgages.

Private lenders are not federally or provincially regulated because they do not accept deposits from the public. Since private mortgage terms are generally shorter and come with higher interest rates and fees than from traditional lenders, they are mostly meant to be a temporary measure to use before transitioning back to typical mortgage lenders.

Who should seek help from a private lender?

While not everyone may require the services of private lenders in Ontario, there are a number of different categories of people for whom these types of lenders can be incredibly helpful.

Traditional lenders can be quite strict when deciding on who to lend to. However, as private lenders are much less strict, their biggest clientele base includes the different groups of people who are most likely to be denied a mortgage loan from a traditional lender.

Therefore, the following are the most common groups of people that are perfect candidates for a loan from a private lender:

1. New immigrants

Unfortunately, many recent immigrants likely do not have enough work experience within the country or a good enough Canadian credit score to be approved for a loan by a traditional lender.

Although not all private lenders will immediately accept mortgage loan applications from new Canadian immigrants, there are exceptions. Indeed, the chances of getting a loan from a private lender under such circumstances is still definitely higher than getting one from a traditional lender.

2. Self-employed individuals and those with irregular incomes

Since most traditional lenders want to see at least two years of employment history in Canada before offering a mortgage loan, if someone is self-employed or their income is irregular or commission-based, they may not be approved for such a loan. Thus, such people may also opt for a loan from a private lender.

3. Individuals with foreign income

These days, with remote work becoming increasingly common, it is more commonplace for Canadians to be employed by foreign companies. However, when it comes time to apply for a mortgage loan, if you only have foreign income, it will be difficult to get approved by a traditional lender, whereas some private lenders may still offer you a loan.

4. Individuals with bad credit scores

Another factor that deters traditional lenders from accepting a mortgage loan application is a bad credit score. However, private lenders may have mortgage loan options available even for those who have sub-par credit scores (below 600). That being said, if your credit score is particularly bad, the mortgage interest rate that you are offered may be especially high.

Important Factors to Consider When Deciding on the Right Private Lender in Ontario

If you have settled on going with a private lender to get your mortgage in Ontario, there are a number of different factors to carefully consider in order to find a lender that is the best fit for you. These factors include the following:

1. Private lender fees

Since private lenders are not subject to any regulations in Canada, they can each set their own fees and lending conditions.

Before you agree to a loan from a private lender, make sure you have a full understanding of their fees, including private lending fees, brokerage fees, legal and appraisal expenses, set-up costs, and administration fees.

Note that you may be able to find certain lenders that charge much lower fees than others. It helps to form a budget ahead of time, as this will guide you in the right direction and help you find a lender that is well-suited to your needs.

2. Interest rates

While the average interest rate you will be offered on a mortgage loan from a private lender will generally be higher than those from traditional lenders, shopping around for a private lender can be beneficial, as some of them offer much better rates than others.

It can be helpful to consider a given lender’s interest rate and fees as two parts of a bigger picture. For example, one lender may offer an 8% interest rate without fees, while another may offer an interest rate of 6%, but by the time all of their fees are added up, this may equate to about 9%.

3. Mortgage conditions

Another matter that is important to ask questions about before signing a mortgage loan agreement with a private lender is the conditions of the loan. For instance, it is necessary to understand exactly what will happen if you miss a mortgage payment.

It is also essential to understand elements of the loan such as prepayment privileges, or penalties and potential costs to get out of the mortgage. Never sign a mortgage loan agreement until you know exactly what you are getting into, and do not be afraid to ask questions ahead of time.

How Canadalend Can Help You Find a Reliable Private Lender

If you are searching for private lenders in Ontario who will work with you to meet your needs as you pursue a private mortgage loan, you can rely on Canadalend to keep your best interests in mind.

We have access to banks, credit units, and other alternative private lenders, and our agents always work hard to ensure you get access to the best, most competitive rates available.

If you ever have any doubts or questions, our agents would also be happy to answer your questions and offer guidance, as they have a thorough understanding of all products, features, and rates.

When you work with Canadalend for mortgage loan approval, you will never have to worry about frustrating delays. Our agents are available seven days a week to ensure that your application stays on track. We genuinely care about your needs and will always go the extra mile to get you the mortgage loan that you are looking for.

For more information on how we can help you find the best private lenders in Ontario, or to learn about the role we will play in the process of getting you a mortgage loan, call Canadalend at 1-844-586-0713 or contact us here.

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