Alberta Private Mortgage and Home Equity Lending
Canadians have been borrowing against their home's equity in record numbers. The Alberta job market and recent mortgage stress test has resulted in increasing amounts of borrowers requiring private funds. They use home equity loans for many reasons including home improvements, investments, education, and high interest debt consolidation. These loans are one of the easiest ways for Canadians to access money but for many these loans are not readily available through banks.
When it comes to loans, banks have strict criteria based on income, employment history, credit rating, and more. Those who have suffered late payments, high debt ratios, previous bankruptcy, foreclosure, or are self-employed without the ability to provide all the necessary statements and tax returns, will experience difficulty obtaining traditional financing. Even if the consumer has substantial equity in their home, they will be turned down for a loan. Unfortunately, it turns out when you need money the most the bank is unable to provide assistance. Even if your home is completely paid off!
The uncompromising lending criteria banks use create an attractive private residential equity loans market. Becoming a private mortgage lender involves a certain amount of risk but opens up a whole new way to invest in real estate. Many real estate investors enjoy being private lenders because of the simplicity, control, and flexibility offered as well as the potential to earn much higher than average rates of return. In addition, you are able to lend using your RRSP, TFSA, and other registered funds to grow your portfolio tax deferred/free!
A private home equity loan is an asset based loan placed through a private investor. In a private loan, the lender/investor does not take credit rating and income into consideration. The loan is entirely based on the asset value of the property being used as collateral. Only a percentage of the property’s value (loan to value ratio) is considered when making decisions to mitigate the lenders exposure to risk. Private home equity loans are always significantly more expensive to the borrower because this type of loan is not based on traditional credit regulations and mortgage default insurance is unavailable to the investor. In return, the private lender is rewarded with significantly higher than average interest rates which end up being the return on investment.
Some investors prefer more rewarding interest rates with high loan to value ratios, while others prefer lower interest rates with better equity positions. The interest rate on the loan is the return on investment. A very attractive feature for private lenders is the complete control they have over the lending decisions. The lender only lends money against properties with an equity position they are comfortable with and to properties they deemed marketable. All terms and conditions of the loan are set by the lender and all ongoing decisions are theirs to make.
A typical private lending transaction provides the lender with high rates of return, within a pre-determined time frame, and exactly as expected, unlike the volatility of other investment methods such as the stock market. In the event of default, both the borrower and investor are treated fairly in Alberta courts with foreclosure proceedings. EquityApproved.ca does not handle the lenders money. We broker the loan and introduce the lender to the private loan opportunities. All money is handled in trust through a solicitor of the lenders choice or a Trustee when using registered funds.
