Most Canadians are not familiar with the concept of private mortgages. There is nothing inherently complicated about Private Mortgages - they're just unfamiliar territory for many. Private Mortgages fill the gaps that the Institutional Lenders, such as the banks, are unable or unwilling to fill. They offer an alternative source of financing to borrowers and a high yield investment opportunity for investors.

Private Mortgages are funds that come via Private Individuals who lend out for Investment purposes. Typically many of these funds still travel through the same traditional Banking Institutions, who help their clients connect their self directed funds to Borrowers.

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.

The traditional Institutional lenders are usually conservative by nature and like to deal with mortgage transactions that meet their normal lending criteria. As Institutional Banks become bigger and interest rates become lower, the requirements for “perfect” deals increases and deals that do not fit their mould are either cut back or summarily 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 a number of reasons. Typically, 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.

Private mortgage lenders base their rates on the area, type of property, degree of risk they perceive, and estimated costs of administration (collection). Interest on Private Mortgages typically range between 9% for first mortgages to 15%+ for second and subsequent mortgages.

The Broker will require a current appraisal, Credit Bureau, proof of income/job letter as confirmation of the earning power of the prospective borrower.

Typically a Borrower will be charged 3% of the funds borrowed. As well the Borrower is responsible for the Appraisal fees, Legal costs of the lender, and mortgage insurance.