Private Mortgage Solution for Second and Third Mortgages

There are a number of factors to consider when evaluating the rates of different Private lenders for second and third mortgages.

For example, loan to value (LTV) rates will vary depending on how much equity the borrower has in the property. A loan with a high LTV will cost more in interest than a loan with a low LTV. Also, in this case, the lender’s fee will be higher than a loan with a lower loan to value because of the increased risk to the lender as a second or third in line.

The process of obtaining financing for residential and commercial properties with a private mortgage is much simpler than the process for traditional lenders. Although private lenders will still ask to verify some information to satisfy their internal lending guidelines, in general, it may actually be faster and easier.

Private lenders assess a mortgage loan application based on the allowable use according to the city by-law and its location in the neighbourhood. A property appraisal is certainly a requirement that borrowers will need to satisfy as part of the refinancing process.

Generally speaking, private lenders will allow higher loan-to-value (LTV) than traditional banks and lenders.

Financing second and third mortgages are different from the residential first mortgages. In addition to the standard loan requirements, second and third mortgage lenders will ask for a reasonable exit plan on how the borrowers plan to clear the mortgages by the end of the Term.

Some borrowers may choose to consolidate the mortgages into one simple mortgage by the end of the Term. While others will plan to refinance using of the increased equity after renovating the property. There are several other avenues to consider as a valid exit plan and each can be discussed in detail with the right lenders.

In such a scenario, where the exit strategy of the borrowers may not be sufficient to mitigate the risks, a joint venture with another real estate investor may be a reasonable option.

Private lenders are an ideal option since they are not tied to the same lending guidelines as traditional lenders which is limiting. Unlike bank loans, private lenders focus more on the value of the property and the borrower’s exit strategy to determine the terms of the loan. This means that they will not make any preconditions on the borrower’s credit score or debt to income ratio.

A big advantage of hard money lending is that you can beat traditional lenders’ interest rates and timeframes. While traditional banks are known for their long loan terms, hard money loans can close in just days or weeks. This is important in time-sensitive situations, such as qualifying for a second and third mortgage. Getting a mortgage loan approved faster helps you resolve your personal situation faster and avoid delays.

Origination fee can also be referred to as “commitment fee”, or any other name. It usually refers to the underwriting or processing fee. This fee can cover a variety of expenses, from processing the loan to underwriting the loan. The amount of this fee depends on the lender and the type of mortgage loan. It is always stipulated in writing so there is no bad surprise to the borrowers on the closing day. If you are not sure how much you are paying for your origination fee, it is a sign that you are not working with an ethical private lender. Be aware and find other private lenders who are transparent with their origination fees.

At Canadian Private Mortgage, we disclose our commitment fee clearly in writing from the beginning of the process.