Services · 07 · Private & alternative lending
A short-term solution with a way out.
When a bank says no, alternative and private lenders can say yes, at a higher cost. I only recommend one with a clear plan to leave it.
07
What it is
Alternative (B) lenders are trust companies and credit unions that accept income or credit a bank declines, at somewhat higher rates and usually with a lender fee. Private lenders are individuals and mortgage investment companies that lend mainly on the equity in the property, for short terms and at the highest cost.
These loans are tools for a specific problem and a limited time: completing a purchase, stopping a power of sale, consolidating debt while credit recovers, bridging to a sale. Before you sign, you see the full cost and the exit.
Who it is for
- Borrowers declined by a bank for income or credit
- Owners with tax arrears or a mortgage in default
- Buyers who must close before another property sells
- Owners who need funds quickly for a short period
How it works
Problem and exit
What the loan must solve, for how long, and how it will be repaid.
Full cost in writing
Rate, lender fee, broker fee, legal costs and the cost to renew, before you commit.
Appraisal and approval
Private lenders decide mainly on the property and the equity in it.
The way out
A dated plan to refinance with a lower-cost lender, or to sell.
Documents to have ready
A starting list. Your own checklist is built after the first conversation.
- Government photo ID
- An appraisal, ordered through me
- Mortgage statements and the property tax bill
- Whatever income documents you have
- The purchase agreement, or the notices you have received from your lender
Common questions
How much more does it cost?
Rates are higher than bank rates, and there are usually lender and broker fees taken from the loan. Costs vary widely with the equity and the property, so I show you the total in dollars, not only the rate.
How long is a private mortgage?
Commonly one year, often with interest-only payments. It is meant to be replaced, not renewed again and again.
Is it regulated?
In Ontario, mortgage brokerages and the people who arrange private mortgages are licensed by FSRA, and you must receive written disclosure of the costs and risks before you sign. You should also have your own lawyer.
What if I cannot leave it within a year?
Then the exit was not realistic. We test it before you borrow: what must change in your credit, income or equity, and by when.
Talk it through with Hamed.
Eight questions, about a minute. Hamed reviews your answers and calls you, usually the same business day.