Not everyone can qualify for bankable mortgage loans. Private mortgages are a great alternative for while you are trying to establish or fix your credit, but are not meant to be a long-term solution. Private lenders tend to be less strict about your credit history, and have less requirements for an approval than a bank will. Since there is a higher risk of default in these situations, private lenders often charge higher fees (lender & broker fees, legal fees etc.), and a higher interest rate (typically anywhere from 10%+) and the terms are normally shorter at 1-3 years vs. the traditional 5 years.

Private mortgages are not always the most sought after option, but they definitely have a role within the market.

These are examples of when a private mortgage may be a good option:

• Borrowers with little to no credit or have low credit
• Emergency funding for those going through foreclosure, or those with property/income taxes in arrears
• Mobile homes or micro-condos ( < 600 sq ft) since banks will not finance/refinance these types of properties
• Second mortgage/investment properties
• Self-employed borrowers have a hard time qualifying for bank loans, especially when their income is unstable or unverifiable
• Non-residents

Struggling to Understand Your Credit Score?

Have you ever wondered how your credit score is compiled? Your score is out of 900 – 0 being the lowest and 900 the highest or best credit. Any score over 680 is considered to be “A” credit. No one will ever have a score of 900 because as soon as you use your credit your score lowers.

The largest % of your score is made up of repayment history. Pay your minimum balance on time rather than your full balance 5 days late. The second largest % of your score is based on your balance versus your limits. Keeping your balances under 70% of your available limit will help keep your score in good standing. The third largest % of your score is based on your ability to manage different credit accounts. Lenders look for a minimum of 3 different credit accounts on your bureau.  Showing different credit accounts in good standing will show lenders how responsible you are with you credit. A small % of your score is based on the average age of your account. Avoid closing out old accounts and opening up a number of new accounts as this will lower the average age of your accounts. The remaining % of your score is the amount of inquiries on your credit. Applying for a number of different types of credit gives the perception that you are a credit seeker. Try to keep your inquiries under 6 per year.  (The exception to this is if you are shopping for a truck, etc. if you “hit” your bureau several times within a 24 hour period it will count as one hit.)

Remember:  Your score will lower much quicker than it will increase.  Equifax and Trans Union are automated scoring systems so if you know the facts you are empowered with obtaining and maintaining a strong credit score,

It is recommended that as a consumer, you verify your Credit Report annually to ensure that there is no fraudulent activity occurring in your name.  Please visit www.equifax.ca or www.transunion.ca

*Additionally, many insurance companies now offer a credit protection program on your homeowners or rental insurance policy