While the majority of Canadians can get mortgages with banks, a large portion still cannot. Banks have strict requirements, including employment, credit score, and income. Private lenders take a far more straightforward approach that improves your chances of approval. Private lenders focus on the property itself rather than on the borrower.
Many private mortgage lenders service Cambridge and other cities across Ontario. Cambridge's diverse population and economy make it an excellent location for private lending. Mortgage Broker Store handles applications that don’t meet traditional bank criteria.
One of the first things these residents need to be aware of is the loan-to-value ratio (LTV). Private lenders focus on this LTV ratio and use it to decide if a private mortgage gets accepted. To come up with this particular number, the formula goes like this:
All existing mortgages, plus all proposed mortgages, are divided by the appraisal value.
Here is an example for a property with a $500,000 first, is requesting a $250,000 second, and has an appraisal value of $1,000,000 (500,000+250,000)/1,000,000 = 75%
Cambridge's Housing Market Overview: Affordability Challenges and Private Lending's Role
There's some good news provincially regarding house prices that affects the market in Cambridge. The price of a single-family house stayed unchanged in May.
Even with a positive outlook on prices, the area has affordability challenges. In fact, the Canadian Mortgage and Housing Corporation (CMHC) has a recent report titled 2024 Housing Market Outlook. The report expects there will be weaker economic and housing market growth across the nation and in Cambridge in 2024. The research also shows that housing will start to show a slight improvement over the next two years. Supply challenges and the lag of high interest rates mean that new construction will only slightly improve.
Exploring Private Lending Options Tailored to Cambridge's Diverse Neighbourhoods
Cambridge has several diverse neighbourhoods. According to AreaVibes, the town has an overall livability score of 89. It's ranked number 10 in Ontario but scores only a C+ rating for the cost of living.
The area has various locations, like Hespeler Village. Although this neighbourhood has an excellent housing rating of A+, its cost of living score is C. Another location, Blair Road, has a similar low cost of living rating.
That generally means things are expensive in these areas and others in Cambridge. People living in the town might need credit and credit cards to pay for costly items. If that's the case, their credit rating can suffer. Remember, Equifax reports on-time payments and balances versus the credit you have available are two significant factors affecting your score. According to this agency, if your score drops below 580, you’ll have difficulty obtaining a traditional loan from a bank.
That's where a private lender comes in handy. Their approvals are based on the amount of equity you have, not necessarily other metrics like your credit score. Generally, a private lender will consider you for a loan if you have at least 25% equity. Equity is defined as the amount of your home or property that's mortgage free. As of June 2024, private loans are 8% -12 % interest and 4% to 8% in fees.
Guidance for Cambridge Residents Considering Private Lending Solutions
Private lenders usually don't approve an application if the LTV exceeds 75%. It's important to remember that the LTV indicates how much equity you have in a property. Equity is defined as the amount of property that you've paid off and own. Private lenders usually require over 25% for approval.
This system is different from the criteria used for traditional loans, such as those from banks. Banks require and emphasize a credit score above 580 for approval. More traditional institutions also look for stable income, like full-time employment for at least two years. Banks also prefer what's called a debt-to-income ratio of 40% or less. This ratio compares debt payments made monthly to gross monthly income.
Considering private lenders in Cambridge? You'll also want to know about their regulations and how the industry is governed.
Regulatory Insights: Navigating Licensing Requirements for Private Lenders in Cambridge
Private lenders in the province of Ontario are regulated by the Mortgage Brokerages Lenders and Administrators Act 2006 (MBLAA). This legislation requires private lenders to be licensed or work with a licensed mortgage broker. The Financial Services Regulatory Authority of Ontario (FSRA) oversees either of these regulations.
The MBLAA regulates that private lenders adhere to ethical standards and disclosure requirements regarding information about fees, interest rates, and loan terms.
Interest Rates and Lending Terms in Cambridge: Insights into Market Trends and Affordability Factors
Homeowners in Cambridge looking for a private loan mortgage will likely need to pay a higher interest rate than more traditional products offer. Private lenders take on more risk because their clients often have bad credit.
Private lenders offer flexible repayment terms that fit borrowers' requirements. Different fees can apply, including a lender setup fee. Borrowers should also be ready to pay an appraisal fee and legal fees.
Looking for Private Mortgages in Cambridge?
Mortgage Broker Store focuses on numerous mortgage-related products. One of our priorities is mortgages that don’t meet traditional lending institution requirements. Our team includes private lenders, brokers, and licensed mortgage agents. Let us help you prepare for and get a private loan that meets your specific requirements. We can supply the funds you need to halt a power of sale or foreclosure.
Email [email protected] or call 416-499-2122.