We all know by now that under the new mortgage rules at the beginning of 2018, homebuyers who don’t require mortgage insurance — those with a down payment of 20% or more — must qualify for their mortgage at a higher rate. This new stress test doesn’t apply to people renewing their uninsured mortgage at this time.

Mortgage Stress Test

The rules aim to cool the hot Canadian housing market, particularly Vancouver and Toronto. However, the measure has a derivative effect, as Canadians flock to alternative lenders when they fail to qualify for mortgages at the increased rate.

The regulators have made it very difficult for banks to lend to middle income, real estate investors, and the self-employed. What we are seeing now is an increase in private mortgage applications as would-be homebuyers who cannot qualify for mortgages under traditional lenders look for alternatives.

Can’t Qualify for a Bank Mortgage? How Private Mortgages Work?

When it comes to private mortgages, our lenders will look at your application on an equity basis and will consider your application even if there is bad credit, no income, previous foreclosure or limited -documentation to provide. Our mortgages can be negotiable for open terms, interest-only payments and short-term financing. Most of our borrowers who are seeking private mortgage financing are usually looking at it for a short-term only.

What our lenders look for:

1. Geographical Location – The location of the property when seeking private financing would be one of the most important things that our lenders look for. This is also an investment for the lender. The liquidity of the property is one of the most important things. Private lenders prefer properties located in a major city i.e. Vancouver, Surrey, West Vancouver, Victoria etc. but may also consider properties located in other areas as long as they are in close proximity to a major city.
2. Property Type – Private lenders prefer single-family dwellings located in a major city but will also consider other properties such as condominiums, townhouses, commercial properties etc.
3. Loan to Value – Currently, for Private Mortgages in BC, our lenders will look for applications that are under 75% Loan-to-Value. If the property is appraised at $1,000,000, mortgage loans in the amount of up to $750,000 or less will be considered.

As long as the above criteria are satisfied by our lender partners, other factors such as income, credit, documentation etc. may not be as important to the lender. We will consider applications for jumbo-sized mortgage loans, construction mortgages, new to Canada, self-employed, bad credit, no credit etc. If you are having difficulty looking for the right mortgage lender for your situation, contact us and we will find a home for your mortgage.