Private mortgages in Ottawa - 4 important points

Here are 4 important points to consider when looking at private mortgages in Ottawa.

Private mortgages in Ottawa

1) A private mortgage can help protect the rate and terms of your first mortgage:

One main challenge with refinancing your current mortgage, if your lender cannot do a blended rate, is that your rate may increase substantially on your entire mortgage.  This is because refinance rates are now higher than purchase and renewal rates, under the new mortgage guidelines.  If you only need an extra $20,000 for example, it would be unfortunate to see your entire mortgage change to a higher rate.

As a caution, the rate on the private mortgage will be higher however then typical traditional lender rates.  Private mortgage rates usually range from 8.99% to 12%. The terms can be open, a 1 year term and so on. Also, some private mortgages are interest only with the ability to pay more on the maturity date.  Others you can make principal or interest only payments throughout the term.

Although 8.99% or more may seem high, if you are consolidating credit cards at 21% to 22% your rate would now be less then half with the private mortgage.  

2) A private mortgage may be easier to qualify for:  

If you cannot qualify to borrow more funds with your current lender or cannot be approved due to outstanding collections, CRA tax owing, debt servicing ratios too high, poor credit history and so on, a private lender may have more flexibility with assisting in these situations.  

Private mortgages typically can go to a higher debt to income ratio and work with those with credit challenges.  

3) You may be able to borrow more with a private mortgage:

The private mortgage amount available is based on the appraised value of your home in Ottawa.  Typically with your current bank or lender, you can refinance up to 80% of the value of your home.  Some private mortgage lenders can go up to 85% of the value of the home which may allow you to access more funds if needed.  

4) You may not have to pay anything out of pocket to set the mortgage up or for the ongoing payments:

Some private mortgage lenders can work the costs and payments into the loan allowing you access to the funds with no money out of pocket up front and no payments throughout the year, to help those with current cash flow challenges.  

Private mortgages in Ottawa come with lenders and other fees. However if borrowing over 80% of the value of the property, mortgage insurer fees (ie CMHC) will not be applicable.