Private Mortgage Lenders in Cambridge, Ontario
The city of Cambridge, Ontario, is located just southeast of the Greater Toronto Area. Combined with the nearby cities of Kitchener and Waterloo, Cambridge is part of the Tri-Cities area, a densely populated and economically prosperous region of Ontario.
With a sizeable population and plenty of draw for homebuyers and investors alike, Cambridge is home to private and alternative mortgage lenders who can help you find a mortgage that suits your needs and your property.
What are Private Mortgage Lenders?
A private mortgage lender is, basically, any lender that is not a bank, a credit union, or a trust. Private mortgage lenders are not federally regulated, which means they’re not subject to the same restrictions that banks are when it comes to approving mortgage loans. If you’ve been turned away by a bank due to bad credit or unprovable income, a private lender in Cambridge might be a viable option for securing the mortgage you need.
The Different kinds of Private Lenders
There are many private and alternative mortgage lenders in Cambridge and throughout Ontario. These private lenders may operate as one of the following:
- Mortgage Investment Corporations (MICs)
An individual private mortgage lender is self-explanatory — this is a single person with independent investment capital who helps property owners by investing in mortgages.
A lender syndicate is a small group of private investors who invest in multiple mortgages at the same time. If you get a syndicated mortgage loan, your mortgage will likely be funded by a few different investors who have chosen to invest in your mortgage. By spreading mortgage investment capital between a few different investors, a mortgage syndicate mitigates the risk to investors, and in turns keeps interest rates relatively affordable.
MICs are a little more complex. An MIC is essentially an incorporated body that pools investment capital from many different sources. Individual investors can choose how much they want to contribute to an MIC, and the pooled capital is then distributed over all of the mortgage loans that the MIC funds. An MIC allows individual investors to invest in real estate for a relatively low risk. Investors can’t pick and choose which mortgages to invest in, so your mortgage may be approved by the MIC as a whole.
Getting Approval from a Private Lender
While banks and other lenders look at your income, credit rating, and other metrics in addition to property equity, private and alternative lenders tend to focus mostly on the equity.
This is good news if you have bad credit, if you’re self-employed, or if your income is otherwise uncertain or difficult to prove. As long as the property contains at least 25 percent available equity (the home’s value minus all outstanding loan debts), you can be approved by a private mortgage lender in Cambridge, Ontario – or most other cities in Ontario.
Rates and Fees Associated with Private Lender Mortgages
Private lenders charge higher fees than banks or credit unions, but this extra cost translates into better flexibility. In general, a mortgage from a private lender carries a higher interest rate, because collecting interest helps the lender mitigate some of the risk inherent in lending to someone with bad credit or unprovable income.
If your mortgage is approved by a private or alternative mortgage broker in Cambridge, you can expect to pay fees for the lender, broker, legal process, appraisal and administration.
As with traditional mortgages, mortgages from private lenders are subject to power of sale in the event that you default on payments. Before applying for a mortgage through a private lender, make sure you have a clear plan for how to pay back your mortgage, including added fees and interest, in a timely manner.
Mortgages on Properties in Cambridge
On average, the population of a city or town correlates to its popularity among investors. This is because it can take a long time to sell a property in a small town, while in a larger city property sales tend to be faster and easier.
Cambridge’s population as of 2019 is around 130,000, meaning lenders can safely offer loans up to 75 percent of total property value. Cambridge’s close proximity to Toronto and its Tri-Cities status means that the population of the whole region is quite dense, allowing for more flexibility and loan potential.
Cambridge’s economy is strong and growing, while its housing prices remain relatively low in comparison to the rest of Ontario and the Greater Toronto Area. Green space and community amenities make Cambridge popular with new home buyers, which in turn will draw more investors to the area.