Mortgage Broker or Private Mortgage Lender

Prospective homeowners are faced with the decision of whether to employ a mortgage broker or a private mortgage lender when deciding on a home mortgage. But what is the better option? Because it is a huge financial investment, buyers need to make wise decisions every step of the way to ensure financial security. A private mortgage lender provides the borrower with the funds at the closing table, whereas a mortgage broker does not actually lend money. Mortgage brokers are responsible for seeking out the most optimum loan packages from a variety of lenders and are able to lock in the best deals. Thus, the recommended course of action is to employ a mortgage broker over a private lender when looking to buy or refinance a home mortgage.

Attempting to find a mortgage that fits one’s specific needs, circumstances, and budget can be frustrating and demand an incredible amount of time. Searching for loan products without the help of broker can mean spending hours on the computer researching, going from lender to lender, completing new applications over and over, and trying to negotiate the best deals. A broker is able to sort through the wide variety of mortgage products offered by various lenders and find the best package based on the buyer’s financial situation. This decreases the time it takes to find a great value and lock in the best home mortgage.

In addition, establish mortgage brokers have preexisting connections, contacts, and relationships with numerous lenders. This positions the broker to receive better deals than an individual will likely receive on their own. Also, the mortgage broker will know their client’s specific financial situation and the mortgage lender that will best cater to that buyer’s needs. Some lenders offer a wider variety of mortgage products for a specific target market. For example, certain lenders offer financing options specifically for those with poor credit ratings while others do not. By employing the help of a broker, prospective buyers avoid wasting time and energy talking with unsuitable lenders.

Brokers are able to advise buyers on any potential problems they may have in qualifying for a loan. They will carefully review credit history and the borrower’s application to ensure that the buyer is in the best possible position to be approved for an appropriate mortgage loan. A reliable mortgage broker will manage all aspects of the loan, which includes collecting all information about the transaction, processing the credit report, verifying employment, and much more. Once the file has been fully processed it will then be transferred to the lender who funds the loan.

Employing a mortgage broker helps remove the uncertainty and headache of finding the perfect home mortgage for every financial budget. Having assistance from a professional broker provides unbeatable value and is an excellent way to ensure mortgage loans are tailored to meet financial goals.

Prospective homeowners must employ a mortgage broker who is well established, that works with multiple private mortgage lenders and is committed to providing superior financing options.

Does Ontario Require a License for Private Lenders?

Not every lender needs a license. private lenders include people, a group of people, or a company. Depending on the situation, those people or organizations don’t necessarily need licenses to lend their own money for mortgages in larger cities like Toronto, Ottawa, Ontario, or the majority of other parts of Canada.

The reasons for using a private mortgage lender

Borrowers may need assistance from a private lender for a variety of reasons. You might contact Expert Mortgage for a private mortgage for the following reasons:

  • You can’t wait through a protracted approval process and run the risk of not being authorized because you need the money right away.
  • A bank or other traditional lending institution won’t approve you because of your terrible or poor credit.
  • You declare your income in a non-customary manner, or if you work for yourself, the bank may not be taking all of your revenue into account.
  • You are purchasing a non-traditional piece of real estate that a traditional bank or institutional lender would not finance.
  • You merely require a brief loan.

Private Mortgage Lender Types

The three most typical kinds of private lenders are as follows:

Individual lenders: A person is regarded as an individual lender if they use their own funds to finance private loans.

Syndicate investors: A syndicate mortgage is one that is purchased by a number of investors pooling their own finances into one loan.

Mortgage investment corporation (MIC): When a group of investors pool their individual funds and make them accessible to invest into a number of different mortgages concurrently, provided that the borrowers meet certain requirements to qualify for the loan, this is known as a MIC.

What Is the Private Mortgage Interest Rate?

The loan amount, the property’s valuation, the location of the property, and other variables all affect the interest rates for private mortgages. Depending on the various elements that are important to the particular lender, private mortgage interest rates range from as little as 3.99 percent to as much as 13 percent for a private first mortgage and from as little as 6.99 percent to as much as 18 percent for a private second mortgage.

A MIC must provide a higher rate of return to its investors while still leaving additional interest to pay itself, so individual private investors are often able to offer better interest rates than a MIC.

Borrowers only turn to private lenders when they are rejected by banks and other traditional lenders like Duca Credit Union, Equitable Bank, or Hometrust because they typically demand higher interest rates than conventional mortgage lenders.

How Much Does It Cost To Get A Private Mortgage?

Mortgage Brokers receive a commission from banks and other institutional lenders for each mortgage they successfully fund on their behalf. However, since private lenders do not pay a commission to the brokerage, you are charged instead. Additionally, private lenders will charge the borrower an additional lender fee in addition to a modest legal fee borne by the lender because private mortgages often carry higher risks for the lenders. The borrower may be compelled to employ the aid of their own attorney to defend them in the transaction, depending on the loan amount.

Depending on the size of the loan, the complexity of the transaction, and the risk to the lender, the total expenses that you can anticipate, including the lender and broker fees but excluding the legal fees, can range from as little as 2 percent to as much as 10 percent of the entire loan amount.

The good news is that these fees are typically deducted from the loan when it is funded, preventing you from having to pay them out of pocket.

For instance, the total closing expenses on a mortgage would be $6,000 if you were applying for a $100,000 private first or second mortgage and the lender and broker fees totaled 4%. In addition, $2,000 in legal fees would be required. Simply applying for a mortgage for $106,000 as opposed to $100,000 would allow you to pay all closing charges without having to pay them out of your own pocket.