Private Mortgages in Bowmanville, Ontario

Bowmanville, Ontario has a population of around 40,000 people as of 2020. With beautiful parks and museums, the city has a peaceful, small-town atmosphere, while its proximity to the urban amenities of Toronto and Oshawa make it attractive for young homebuyers and those looking to start a family. 

If you’re considering buying real estate in Bowmanville, Ontario, you’ll also want to look into the types of mortgages and home loans available to you. If you’re having trouble being approved for a prime mortgage from a bank, a private mortgage could be your ticket to owning property in Bowmanville.

What Is a Private Mortgage?

A private mortgage is any mortgage lent by a private lender -- usually, this is an individual with their own investment capital who chooses to invest in real estate loans. This means that if you take out a prime mortgage, all the money for your mortgage is coming from a single source, rather than a pool of many investors or financial entities.

Private mortgages tend to be relatively short-term loans. Where a prime mortgage may be paid back over a period of 30 years, or sometimes even longer, the term for a private mortgage is usually fewer than 5 years. Private mortgages tend to carry higher interest rates, and the borrower often has to pay additional fees such as legal fees, appraisal fees, and broker fees. These additional fees and costs help mitigate the risk to the lender. 

How Is a Private Mortgage Different from a Bank Mortgage?

Bank mortgages -- sometimes called “traditional” or “prime” mortgages -- are regulated by the federal government in Canada. For borrowers, these regulations often come in the form of strict rules for your financial history and income situation. For example, to get approved for a prime mortgage, you need to have a credit rating of at least 600. You also need to be able to prove that your income and employment are stable. 

During the mortgage approval process, you’ll be expected to provide paperwork and documentation including but not limited to T4s, tax returns, records of employment, records of previous debts or loans, investment certificates, and anything else that can help prove that you will be able to afford a mortgage. 

Private lenders, on the other hand, aren’t as concerned with your financial history and credit rating. Instead, a private lender will focus more on the value of the property you want to mortgage. This does mean that you’ll need to be prepared to put more money toward a down payment than you might with a traditional mortgage. If you’re purchasing a private home, private lenders usually want at least 25 percent existing equity in the property. If you’re purchasing a commercial property, for example if you plan on starting a business, then the lender will want more equity -- usually around 35 percent. 

What Are the Advantages of a Private Mortgage over a Traditional Mortgage?

Obviously, the major advantage of a private mortgage over a traditional mortgage is that it’s easier to get approved for. This doesn’t mean that you should seek a private mortgage if you can’t easily afford a traditional one. However, there are circumstances where a person could afford a mortgage, but their financial situation is less than ideal on paper. 

For example, you may have self-employment income that is variable or difficult to prove on paper. Maybe you have bad credit from previous debts or investments -- the debt may be resolved, but the bad credit can linger. Or maybe you’re looking for a mortgage as an option to get through a period of financial difficulty -- for example as temporary extra income if you’ve been laid off, or as a way to consolidate debts or cover an emergency expense. 

How Do You Get a Private Mortgage?

To apply for a private mortgage, you might approach a private lender directly, or you can go through  Mortgage Broker Store’s Bowmanville specialists that have experience working with, and connections to, local private mortgage lenders. A broker acts as a middleman between you, the borrower, and the lender, and can help you find a lender that can offer you the best rate, and negotiate your mortgage terms to find a loan that works best for you.