So, what exactly is a private mortgage? When it comes to a mortgage, there are typically three different options. Your first option is from a bank, also known as an “A” lender. Banks will require a client to have strong credit, the ability to prove their income and show they can pay the mortgage and that they don’t have too much outstanding debt. These are calculated using certain ratios. Next, you have your “B” lender. These are alternative banks and credit unions. B lenders have a lower threshold when it comes to credit, so a client who might have a slightly lower credit score can still qualify. B lenders also require income to be shown, however their ratios are different and also allow clients who are self employed the ability to potentially qualify using different metrics. B lenders are a great option for people who can qualify as you’ll have a traditional mortgage when it comes to term length and paying principal and interest. However, B lenders rates are slightly higher due to their higher risk tolerance. Now we have our private lenders. Private mortgages are interest only mortgages with very short terms. Typically 12 months, but can often be as short as 1-3 months. Private mortgages can be used to solve many problems. Often used as a bridge loan between two properties, or when a property needs to close quickly. Some private lenders can close in as little as 24 hours. Private lenders care much less about credit and income and look more at the property. They lend based on the value of the asset, and not on how much money the client makes or their credit score. That said, some lenders like knowing a client has the ability to pay, so some lenders will still look at income, however it’s not a deal breaker like it is for A or B lenders. Private mortgages should be looked at as a stepping stone. Perhaps someone’s credit has been bruised, or their job has been lost of affected. A private mortgage can allow a client to get their credit back on track and back into a traditional mortgage. Because private lenders often ignore credit scores and income, they take on a much higher level of risk. As such, their interest rates and fees are much higher than a bank or B lender. As mentioned earlier, they are also interest only, which means you aren’t paying any principal. This is why it’s so important that you have as many options as possible, because private lenders all have different criteria, their rates and fees can vary greatly. This is why using LenderBidding is so important. When a clients deal is submitted on our platform, it gets looked at by over 46 of the biggest private lenders in Canada. As always, it would be our pleasure to take care of you. If you have any questions about LenderBidding or private mortgages, please email us at info@lenderbidding.com