COMMON PRIVATE MORTGAGE QUESTIONS

​

​

What is the current private mortgage interest rate?

​

There are three major factors that determine private mortgage rates:

​

• Loan to value – How much the property is worth vs the outstanding mortgages. Higher loan to value attracts higher interest rates.

• Priority of the mortgage – How many mortgages will be registered on the property and where does the private mortgage fall in the order? (First Mortgage, Second Mortgage, Third Mortgage etc)

• Urgency – How quickly are funds required?

​

In addition to the interest rate, you should also consider the cost of a private mortgage. When talking to mortgage brokers or agents make sure that you inquire about the following:

​

• Lender Fees – One time fee payable to the lender to compensate for the risk involved in your transaction

• Broker Fees – The amount the brokerage will be remunerated for arranging the mortgage

​

How much are my monthly payments going to be?

​

This is determined by the amount of money being borrowed and the interest rate. Most private mortgages are interest only payments, which means that the principal balance of the mortgage is not being paid down. The monthly payments are in turn less expensive than blended payments.

​

This is a simple way to  calculate monthly interest only payments:

​

Total borrowed x interest rate in decimal form ÷ 12

 

For example – Monthly payments for a mortgage of $150,000.00 at 8% interest are calculated in the following manner:

 

150,000.00 x .08 ÷ 12

Monthly payments would be $1,000.00

​

What is the term of my private mortgage?

​

Private mortgages are generally registered for a 1 year term. However, in some cases it may be a shorter or longer term. You should have plan in place for how to pay the balance of the mortgage when the term ends, for example refinancing with an institutional lender or selling your property.

​

When do you recommend someone uses a private mortgage?

​

Private mortgages should only be considered once all other options have been exhausted and only as a temporary fix. The following are some instances where a private mortgage or second mortgage may be useful:

​

• Debt consolidation

• Rebuilding credit

• Renovation/construction projects

• Income tax or property tax arrears

• Mortgage arrears,condo arrears and power of sale proceedings

• Short-term injuries/illnesses

• Flipping houses

• Bridge loans

• Unique work situations

• Last minute financing

​

If you have any specific questions, feel free to call me directly at 416-996-9899.