Bad Credit Mortgage Lenders: Is Private Lending Worth it?
Obtaining a mortgage through a private lender may be more expensive than borrowing from a bank, but it's often the best option for people who are unable to qualify for a loan through a "traditional" lending institution. But is borrowing a large sum of money from private bad credit mortgage lenders a good idea? Here's what you need to know about private bad credit mortgage lenders.
Private Lending for First-Time Homebuyers
Under the new mortgage regulations implemented by the government last October, individuals seeking insured mortgage must pass a "stress test" that requires them to qualify at an interest rate higher than what current homeowners pay. Borrowers will also need to have a higher annual household income in order to qualify for an insured mortgage. For many people who are not approved by banks, bad credit mortgage lenders are the only institutions that are willing to take on the risk of approving a home loan. This comes at a cost, however; interest rates can be as high as 10 percent, and there may be borrowing fees that need to be paid in advance.
Private Lending for Emergencies
Bad credit mortgage lenders can provide the necessary money to stop a foreclosure or power of sale, which can usually only be prevented if the homeowner pays off the mortgage arrears (in some cases, the full mortgage amount will need to be paid). Other common emergencies that homeowners use bad credit mortgage lenders for include major home renovations, and medical treatments.
Private Lending for Self-Employed Individuals
Individuals who are self-employed or have an otherwise unverifiable income typically find it difficult to get a mortgage approved by a bank or other prime lender. If these individuals require a large amount of money for home repairs, school tuition, or a down payment on a second property, it is usually a good idea to seek out a private lender, as their borrowing rules tend to be less stringent than those of banks, credit unions, and other traditional financial institutions.
Is Private Lending Worth It?
The above are just a few of the scenarios in which private lending makes more sense than applying for a mortgage through a bank. Contact us today at our Edmonton office to discuss whether borrowing from bad credit mortgage lenders is the best option for your situation.