What is Private Mortgage Funding/Lending and how does it work for people?
Private Mortgages are funds that come from Private individuals who lend out money for investment purposes. Typically many of these funds still come through the same traditional Banking Institutions, who help their clients connect their self-directed (R.R.S.P.) funds to Borrowers.
Who are the Lenders in all this?
In most cases Private Lenders are retired individuals who are looking for a better rate of return than is available to them at a Bank. They are willing to fund mortgages as they can usually generate a greater return for their investment dollar.
Why Use Private Funds?
The traditional Institutional lenders and big banks are usually conservative by nature and like to deal with mortgage transactions that meet their normal lending criteria. As banks become bigger and interest rates become lower, the requirements for “perfect” deals increases and deals that do not fit their criteria are either cut back or are declined. Private Mortgages have filled the gap left when the small Trust Companies left the Canadian scene in the nineties.
Real Estate Investors seek Private Mortgages for many reasons. Usually for reasons of a “unique deal”, expedience, credit issues, self-employment, or when a borrower cannot qualify under the large number of requirements that the conventional lending sources need to be satisfied before they are able to lend.
What are the interest rates on private funds?
Private mortgage lenders base their rates on the area, type of property, degree of risk perceived and estimated costs of administration. Each private mortgage interest is quoted on individual circumstances.