Most people tend to think of private financing as a last resort alternative, however privately funded mortgages gained much attention after federal government changes in mortgage regulations have made it more difficult for many people to obtain a mortgage through an institution (traditional financing). When having difficulties with institutional mortgages, privately funded mortgages are good alternatives to meeting your financial obligations. Whether you’re using private financing to pay down debt or purchase an investment property, a privately funded mortgage will give you the flexibility needed to ease your financial burden while allowing an easy payback option. Concerns about the risk and hassle of obtaining privately funded mortgages are common, but almost all private lenders are licensed professionals with a great deal of experience in the financial industry. The source of money can be from the lenders personal savings or money from a pooled MIC (mortgage investment corporation), where money is taken out of registered pool will multiple investors. Regardless of the source, privately funded mortgages are usually short term investments that can be sold off within 1-2 years. While some may try to obtain private financing through their own research, it does help to seek the assistance of a mortgage broker. A mortgage broker usually has a large portfolio of private lender/investors, each of which they fully understand the guidelines and criteria required. At Canadian Mortgage Services, we have been assisting clients with obtaining privately funded mortgages Brampton and privately funded mortgage Mississauga since 1988. Privately funded mortgages Brampton and privately funded mortgages Mississauga have become very common alternatives when looking to eliminate debt, free up cash flow and ultimately consolidate all high interest debt into one affordable monthly payment.
FAQ’s – Privately Funded Mortgages
Q: What is a privately funded mortgage?
A: A privately funded mortgage is any mortgage that is not from a bank, credit union or trust company. Privately funded mortgages can come from an individual, like you and I, or from a corporation (usually called a MIC (Mortgage Investment Corporation).
Q: Are privately funded mortgages the same as bank mortgages?
A: Privately funded mortgages are not the same as bank mortgages. They have similarities, but they do differ in a couple of notable ways:
- They are generally ‘interest only’ mortgages (meaning they are not amortized to pay down principal)
- They are shorter terms mortgages (typically 1 year at a time)
Q: Are privately funded mortgages safe?
A: When from a reputable source and brokered through a reputable mortgage brokerage…. Yes, they are safe. All mortgages must be registered by a lawyer or title insurance company – including privately funded mortgages. Therefore, terms, conditions, and costs are reviewed to protect your interest (you’re always permitted to use your own lawyer too).
Q: When would I consider a privately funded mortgage?
A: You are likely to consider a privately funded mortgage when institutional mortgage options have been exhausted. A few examples are (but are not limited to):
- Your debt servicing ratios are far outside of the bank/lender guidelines
- You need funds quickly – e.g., within 5 business days
- You are in the power of sale
- You want a second mortgage and do not want to break your existing first mortgage
- Your employment is very complicated or unstable making it difficult to qualify through a bank or institutional lender