Private mortgage in Vancouver
January 14, 2019 | Posted by: Alex Vinarski
Private mortgages in Vancouver.
About 70% of my business as a Mortgage Broker comes from private mortgages. I use private lenders for purchases, and for Equity take out.
With real estate prices in Vancouver so high, many clients have enough equity in a home, but don’t have enough income to get money from the banks. Private lenders don’t look at the income. They lend based on the equity in a property, other factors as client’s credit for example can affect mortgage rate and fee. First mortgages usually for purchase, and second for equity take out.
Rates and fees directly connected with the risk to lender. The higher loan to value ratio is, the higher the rate is. Most of the lenders lend up to 75 % of the property value, and only a couple lenders will lend up to 90%. For second mortgages rates are from 9% to 13%, and fees from 2%. Borrowers are also responsible for appraisal fee $250-$400, and legal fees for lender and borrower. Normally monthly payments consist of interest only, so it is much lower than payments on credit cards that usually 3% of the balance. For example monthly payments for $50000 on credit cards $1500 (3%), and on second mortgage at 12% monthly payments only $500. Private mortgage can be even arranged as Home Equity Line of Credit HELOC. This is very similar with banks HELOC, when client only pay interest on advanced funds, and it’s fully readvanceable. This is a very good product for businesses that have money in and out constantly.
Sometimes, when clients don't qualify with the regular banks, they can get mortgage with B lenders. B lenders are institutional lenders that use special progrmas for self-employed. Normally they would use income based on deposits to busienss bank account, not tax return. With B lenders rate usually aroun 4.5%. This is something in between the bank and private lender.