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Guide to Private Mortgage Rates in Canada
Navigating the Canadian mortgage landscape can be challenging, especially when traditional lending avenues aren’t viable. Private mortgages offer an alternative solution, providing flexibility for borrowers with unique financial situations. This comprehensive guide delves into private mortgage rates in Canada, factors influencing these rates, and essential considerations for prospective borrowers.
Understanding Private Mortgages in Canada
Private mortgages are loans provided by non-institutional lenders, such as individuals or mortgage investment corporations (MICs), rather than traditional banks or credit unions. They cater to borrowers who may not meet conventional lending criteria due to factors like credit history, income verification challenges, or the need for expedited financing.
Using a mortgage broker from Citadel Mortgages can help you ensure you have some of the best mortgage rates and products.
Current Private Mortgage Rates in Canada
As of November 2024, private mortgage rates in Canada typically range from 5.99% to 13.00%, depending on various factors. For instance, first mortgages may start at 5.99%, while second mortgages can have rates beginning at 7.99% and higher.
It’s important to note that these rates are generally higher than those offered by traditional lenders, reflecting the increased risk private lenders assume.
Factors Influencing Private Mortgage Rates
Several key factors affect the interest rates on private mortgages:
Loan-to-Value (LTV) Ratio: A higher LTV ratio indicates a larger loan amount relative to the property’s value, increasing the lender’s risk and potentially leading to higher interest rates.
Property Type and Location: Properties in urban areas or those with higher marketability may attract more favorable rates compared to rural or specialized properties.
Borrower’s Credit Profile: While private lenders are more lenient regarding credit scores, a better credit profile can still result in more competitive rates.
Mortgage Position: First mortgages typically have lower rates than second or third mortgages due to the priority of repayment in case of default.
Mortgage Broker Rates in Canada
Comparing Private Mortgage Lenders
When considering private mortgage options, it’s crucial to compare offerings from various lenders. Below is a comparison of sample private mortgage rates and terms:
| Lender/Broker | 1st Mortgage Rate | 2nd Mortgage Rate | Maximum LTV | Lender Fees From |
|---|---|---|---|---|
| Butler Mortgage | 5.99% | 7.99% | 80% | 1% |
| Home Trust | 6.14% | 8.14% | 80% | 1% |
| Haventree Bank | 6.19% | 8.19% | 80% | 1% |
| RiverRock Investments Corp | 6.99% | 8.99% | 80% | 2% |
| Canadian Mortgages Inc | 7.99% | 9.99% | 85% | 2% |
| Westboro Investment | 8.79% | 10.79% | 80% | 3% |
| Private Lender Inc | 8.99% | 10.99% | 80% | 2% |
| Prudent Financial | 8.99% | 10.99% | 65% | Varies |
| Alpine Credits | 9.00% | 11.00% | 75% | Varies |
| VWR Capital | 9.95% | 11.95% | 75% | 1% (Open) or $750 (Closed) |
| Calvert Home Mortgage | 9.99% (6-month) | 11.99% | Inquire | Inquire |
| Sun Mortgage | 10.00% | 12.00% | 75% | 1.5% |
| Threshold Mortgage Corp | 12.00% | 14.00% | 75% | 3% |
| Guardian Financing | 13.00% | 15.00% | 75% | 2% |
Note: Rates are for informational purposes and may vary based on individual circumstances and lender policies.
Frequently Asked Questions About Private Mortgage Rates and Fees in Canada
Private mortgage rates typically range from 6.00% to 8.99% for first mortgages, and 8.00% to 12.99% for second mortgages. Rates vary based on factors such as property location, loan-to-value (LTV) ratio, and borrower credit profile.
Private mortgage rates are higher because private lenders take on more risk. They cater to borrowers who may not meet conventional lending criteria, such as those with poor credit or unverified income.
In addition to higher interest rates, private mortgages include several fees:
- Lender fees: 1% to 3% of the loan amount. Second Mortgage rates and fees are higher.
- Broker fees: 1% to 3%, depending on the complexity of the loan. Second Mortgage rates and fees are higher.
- Legal fees: $1,500 to $3,000.
- Appraisal fees: $300 to $500.
Private mortgages usually have shorter terms, ranging from 6 months to 1 year. At the end of the term, borrowers must either repay the loan or refinance.
Private mortgages have a faster approval process compared to traditional loans. In most cases, you can receive approval and funding within 48 to 72 hours after submitting the necessary documentation.
Additional Costs and Considerations
Beyond interest rates, borrowers should be aware of additional costs associated with private mortgages:
Lender Fees: Private lenders often charge fees ranging from 1% to 3% of the loan amount to cover administrative costs.
Broker Fees: If a mortgage broker facilitates the loan, additional fees may apply.
Legal Fees: Legal services are required to process the mortgage, adding to the overall cost.
Shorter Terms: Private mortgages typically have shorter terms, often between 6 months to 1 year, necessitating refinancing or repayment within a limited timeframe.
Is a Private Mortgage Right for You?
Private mortgages can be beneficial in scenarios such as:
Credit Challenges: Borrowers with poor credit histories who are unable to secure traditional financing.
Income Verification Issues: Self-employed individuals or those with non-traditional income sources facing difficulties with standard income verification.
Urgent Financing Needs: Situations requiring quick access to funds, where traditional mortgage approval processes may be too slow.
However, it’s essential to weigh the higher costs and shorter terms against the benefits. Consulting with a financial advisor or mortgage professional can provide personalized insights.
Final Thoughts
Private mortgages serve as a viable alternative for Canadian borrowers facing challenges with traditional lending institutions. By understanding the factors influencing private mortgage rates and carefully evaluating lender options, borrowers can make informed decisions that align with their financial goals.
See our private 1st & 2nd mortgage calculator and see how much you can be approved for today!