Who qualifies for a private mortgage?

What Ontario borrowers should know

The best place to start is with the specific reason the application falls outside conventional lending guidelines. The answer depends on the borrower’s full financial picture and the lender being considered. A targeted application is usually more effective than sending the same file to several lenders and hoping one uses a different rule.

Private lending is often used when timing or guidelines are the obstacle

From an underwriting perspective, borrowers may have bruised credit, non-standard income, tax arrears, a short closing deadline, or a property that institutional lenders will not accept.

Equity is usually a major factor

For this particular question, a private lender needs enough property value behind the loan to be comfortable with the risk.

The exit strategy is part of qualification

What changes the answer is that the borrower should have a credible way to repay the private loan through sale, refinance, credit repair, improved income documentation, or another defined event.

The cost question

A private lender may accept a credit profile a bank will not if there is enough property equity. That flexibility is valuable, but higher fees and rates mean the borrower should borrow only what is necessary.

Documents to have ready

• or request current first-mortgage statement and maturity date
• or request property tax status and any other registered secured debts
• or request a realistic property value or recent appraisal if available
• or request the exact amount needed, intended use of funds, and planned payoff or refinance date