Dec. 31, 2013: There are many people that require a private mortgage in Ontario or a second mortgage for their property. They have tried to get a loan or mortgage from the various Canadian banks and have been turned down. The best alternative for people who have been turned down is to contact The Mortgage Broker Store, who is able to help those turned down by traditional lenders.
Some borrowers wonder why they cannot get a mortgage with a higher loan to value (LTV) ratio, let’s use a 90% LTV as an example. There are several reasons people are turned down for mortgages including the availability and cost of mortgage insurance.
Canadian Finance Minister Jim Flaherty has stated that Canada mortgage and Housing Corp. (CMHC) “would be paying a “risk fee” of 3.25% to the federal government on the insurance it writes, starting Jan. 1st.”
This move effectively makes higher risk mortgages over 80% LTV more expensive and harder for the big banks to finance. Today CMHC only insures mortgages up to a maximum LTV of 80% and the fee increase will make it harder for many people to qualify for a loan at the big banks.
All of the major Canadian banks also have minimum requirements for credit rating and debt service ratios, some of these requirements are mandated by CMHC. Therefore if you do not meet one of the requirements such as a good credit score you will be turned down for a bank mortgage in Ontario.
Let’s look at how these changes affect the average consumer. The banks will only lend up to a maximum loan to value on properties, the LTV will change depending on where your house is located and the type of property. Let’s look at a few different examples; a house in Toronto would have a maximum LTV of 80%, the same house in Trenton would have a maximum LTV of 75%. A commercial property in Toronto would have a maximum LTV of 70%, the same commercial property in Barrie would have a maximum LTV of 65%. As CMHC raises its requirements to exclude higher risk borrowers, fewer people qualify for a mortgage.
A private lender in Ontario can be much more flexible on the mortgage terms and conditions. Most private lenders base their lending decision on the equity in your property. Other factors such as your credit score and income are still important but will not stop you from getting a private mortgage in Ontario. Private mortgages are mostly short term mortgages of one or two years. Most borrowers use private lenders for a short period of time and then move on to lower cost bank mortgages when their credit situation improves.
Ron Alphonso of The Mortgage Broker Store is an expert in the dynamic world of mortgages and may be contacted via phone at: 416-499-2122 or 647-385-2122 or via email at: [email protected] For more information on private lenders please go to: www.mortgagebrokerstore.com.