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By Jeff Livingston
Post recession, many people have been left without jobs or with pay cuts. Financially struggling borrowers have defaulted on their loans and their credit scores have plummeted. Although the economy is improving now, most people have not been able to regain their financial stability or rebuild their credit score yet. Getting a loan to buy a home can be a difficult task in these circumstances. Private lenders in Ontario are a good option for such home buyers with a low credit score.
Who are Private Lenders?
Individuals who have substantial funds on hand and are interested in real estate investments may choose to become private lenders. You can often find such lenders at Real Estate Investment (REI) Clubs. They may also be listed at you Local Chambers of Commerce. An online search will also give you the contact details of many such lenders in your area. A family member or a friend can also be a good source to find information about private lenders.
How Does it Work?
Private lenders in Ontario will base their loan on the value of your property rather than your credit score. He assesses the market price for the home, the paid up equity you hold in it and any mortgages outstanding before he lends the money. These factors influence the size of the loan and the rate of interest that you will be charged. The lender will restrict his loan to the amount that can be recovered from the home if you default.
Advantages of Private Loans
–When poor credit history makes it impossible to get loans from banks, credit unions or mortgage companies, private lending may be the only option.
–There is less documentation and verification involved with private loans. The lender is not likely to check your past repayment record or analyze your credit history. This means quick processing time and minimum hassle, making the funds available to you in the shortest possible time.
–The private lender can be someone in your own locality who has an idea of the home values in your area. He may also be familiar with you personally in which case convincing him about your commitment to the repayment plan will be easier. In any case, you can have a direct conversation with a private lender and present your needs to him. A professional company or bank has a much stricter approach which prevents you from offering any information or details to make your loan application attractive.
–For homes that require massive repairs to make them ready to move in, institutional loans may be scarce. A local private lender is likely to be aware of the true worth of the property once it is refurbished and he may readily offer a loan against it.
Private lenders in Ontario make it easy for many people with poor credit history to buy their dream home. In spite of potentially higher interest rates, such loans are still very useful for borrowers who have been turned away by banks.
About the Author: For more information on
mortgages in Canada
, contact Canadian Mortgages Inc